Study on Mutual Fund Penetration levels and future of Mutual Fund Industry in India

Summer Internship Project
Study on Mutual Fund Penetration levels and future of Mutual
Fund Industry in India
Submitted to:
Mr. Anil Chandran
Mr. Naveen Sharma
Mr. Ranjit Roy Ghatak
Submitted By:
AKASH BHADRA
19PGDM-BHU006
IMI BHUBANESWAR

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DECLARATION
I, Akash Bhadra, a student of PGDM of 2019-2021 batch at IMI BHUBANESWAR, do hereby declare
that this report entitled “Study on Mutual Fund Penetration levels and future of Mutual Fund
Industry in India ” has been made by me under the guidance of Prof. Ranjit Roy Ghatak, as per the norms
of IMI BHUBANESWAR, and the same work has not been copied from any source directly without
acknowledging for the part/section that has been adopted from published/Non- published works.
Akash Bhadra

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ACKNOWLEDGMENT
I have taken efforts in this project. However, it could not have been possible without the kind support and
help of many individuals and organisation. I would like to extend my sincere thanks to all of them.
It is a genuine pleasure to express my deep sense of thanks and gratitude to my guide Prof. Ranjit Roy
Ghatak. His dedication and keen interest above all overwhelming attitude to help his students and had
been solely and mainly responsible for completing my work. His timely advice, meticulous scrutiny,
scholarly advice and scientific approach have helped me to a very extent to accomplish this task.
I also owe a deep sense of gratitude to Mr. Anil Chandran (HR Head Union AMC) and Mr. Naveen
Sharma (Regional Head-East Union AMC) for their guidance and constant supervision as well as for
providing necessary information regarding the project & also their support in completing the project.
I profusely like to thank all the faculties of International Management Institute, Bhubaneswar and the
corporate mentors of Union Asset Management Company Pvt Ltd, for their valuable time, kind help and
attention during the project tenure.
Finally, I shall be failing in my duty, if I do not express my deep regards and sincere thanks to my family
for their love, well-wishers and deep inspirations, who always been encouraging me to build up myself
better than yesterday. My vocabulary fails to express my thanks to my friends and seniors for all their well
wishes and encouragement

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STUDENT’S UNDERTKING
I, Akash Bhadra bearing Institute Roll No. 19PGDM-BHU006 declare that the summer internship project
tiled “Study on Mutual Fund Penetration levels and future of Mutual Fund Industry in India” is my
original work and completed under the supervision of Prof. Ranjit Roy Ghatak of IMI BHUBANESWAR
and Mr. Anil Chandran and Mr. Naveen Sharma of Union Asset Management Company Pvt Ltd.
Signature: -
Name: - Akash Bhadra
Date: - 08/07/2020
Place: - IMI BHUBANESWAR

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EXECUTIVE SUMMARY
In few years Mutual Funds has emerged as a tool for ensuring one’s financial wellbeing. Mutual Funds
have not only contributed to the Indian growth story but have also helped families tap into success of
Indian Industry. As information and awareness is rising more and more people are enjoying the benefits
of investing in Mutual Funds. The main reason the number of retail mutual fund investors remains small
is that six out of ten people with income in India do not know about Mutual Fund exists. But once people
are aware of mutual fund investment opportunities, the number who decide to invest in Mutual Funds
increases to as many as two in five people. Mutual Funds now play a very significant role in channelizing
the saving of millions of individuals into the investment in equity and debt instruments.
The title of the project is “Study on Mutual Fund Penetration levels and future of Mutual Fund
Industry in India”
The project report will focus on the penetration of mutual funds. The study will reflect the awareness level,
investment pattern and the selection of a mutual fund scheme and their linkages with the financial
objectives of working individuals. This project aims at making a study of the Indian Mutual Fund Industry:
its current scenario and future outlook in India.
This project gave me a great learning experience and at the same time it gave me enough scope to
implement my analytical ability. This report will help me to know about the investors’ preferences in
Mutual Fund in any particular Asset Management Company (AMC), which type of fund they prefer, which
option (Growth or Dividend) they prefer or how aware they are regarding the Mutual Fund.

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APPROVAL OF THE FACULTY GUIDE
Recommended that the Summer Internship Report titled “Study on Mutual Fund Penetration levels and
future of Mutual Fund Industry in India” prepared by Mr. Akash Bhadra under my supervision and
guidance be accepted as fulfilling this part of the requirements for the award of Post Graduate Diploma in
Management. To the best of our knowledge, the contents of this report did not form a basis for the award
of any previous degree/diploma to anybody else.
Date: - 08/07/2020
Signature: -
Name of Guide: -Prof. Ranjit Roy Ghatak

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TABLE OF CONTENTS
Sl.No. Topic Page No.
1. DECLARATION 1
2. ACKNOWLEDGMENT 2
3. STUDENT’S UNDERTKING 3
4. EXECUTIVE SUMMARY 4
5. APPROVAL OF THE FACULTY GUIDE 5
6. TABLE OF CONTENTS 6
7. MUTUAL FUND INDUSTRY OVERVIEW 7
8. OBJECTIVES OF THE STUDY 9
9. ABOUT MUTUAL FUND 10
10. INFOGRAPHICS ABOUT THE MUTUAL FUND SECTOR 12
11. PARAMETERS OF MUTUAL FUND EVALUATION 14
12. ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI) 23
13. INDUSTRY ANALYSIS 24
14. INFORMATION ABOUT SPONSORS, UNION AMC AND TRUSTEE
COMPANIES
28
15. INDIAN MUTUAL FUND INDUSTRY: CURRENT SCENARIO 30
16. MUTUAL FUND SCREENER 31
17. REGULATORY ACTIONS AMID COVID-19 PANDEMIC 36
18. CHALLENGES AND ISSUES FACED BY INDIAN MUTUAL FUND
INDUSTRY
38
19. GEOGRAPHIC PENETRATION OF INDUSTRY ASSETS 39
20. GEOGRAPHY: RISE OF B30 AND EVENTUALLY B100 41
21. WINNING THE TWENTIES—₹ 100 TRILLION 44
22. KEY TRENDS AND OPPORTUNITIES 49
23. EMERGING PRODUCTS AND BUILDING NEW CAPABILITIES 51
24. TRENDS IN PRODUCT INNOVATION BY INDIAN MUTUAL FUNDS 52
25. COMPARISION OF BANK V/S MUTUAL FUND 53
26. DISTRIBUTION NETWORK 54
27. TIPS ON BUYING MUTUAL FUNDS 56
28. RESEARCH METHODOLOGY 57
29. A BRIEF SUMMARY OF THE SURVEY 59
30. FINDINGS 72
31. FUTURE OUTLOOK 73
32. CONCLUSION 74
33. RECOMMENDATIONS 75
34. REFERENCES 76

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Mutual Fund Industry Overview
Introduction
India has traditionally been a country of people who believed in saving as against spending. Out of their
regular income, people used to spend less and save more for meeting the needs in future. Their
consumption in the present has traditionally been lesser for preparing for a better future. Largely, the
savings for future have found a secure avenue of investment in gold and fixed deposit schemes offered by
banks. However, over the past few years a significant shift towards alternative ways of investment has
been emerging, wherein the preference towards mutual funds has risen at higher levels. The sharp decrease
in fixed deposit interest rates and fluctuating return on gold has shown the people way towards alternative
channels of investment.
A HISTORY OF THE DEVELOPMENT OF INDIA’S MUTUAL FUNDS INDUSTRY
Most commentators, when reviewing the history of the Indian mutual funds industry, refer to there
being six distinct phases, each defined by a specific time period.
Phase 1: 1963-1987
The UTI was established in 1963 by the Reserve Bank of India (RBI) and for 24 years had market
exclusivity. It launched the first fund in 1964. In 1978, control over the UTI changed from RBI to the
Industrial Development Bank of India (IDBI), which had both regulatory and administrative
responsibility.
Phase 2: 1987-1993
In 1987, public sector banks and insurance companies were allowed to also set up mutual funds in
competition with the UTI for the first time. A number of mutual funds companies were established and as
a result this commenced a period of strong industry growth.
Phase 3: 1993-1996
Private sector businesses were allowed to set up funds from 1993, significantly widening the choice of
funds available to the public. Banks and insurance companies led the way here, providing more
competition and further enlarging the market.
Phase 4: 1996-2003
Regulations were brought under the control of the Securities and Exchange Board of India (SEBI) from
1996.

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Phase 5: 2003-2006
The UTI was split into two separate entities. The larger, more public part became regulated by SEBI and
began to compete more directly with the rest of the market. This has also led to further strong industry
growth.
Phase 6: 2006 to till-date
Foreign-owned fund managers began entering the market, setting up as joint ventures or standalone
businesses. In 2014, the AUM passed INR10 trillion (US$143 billion) for the first time. Together with
widespread economic reforms, these last 10+ years have seen significant growth across all parts of the
financial services markets, and especially in the growth of mutual funds. In late-2016, demonetization
provided a significant boost, and substantially increased the number of retail investors.

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OBJECTIVES OF THE STUDY
 To study the concepts of mutual funds.
 To study the current scenario of Indian Mutual fund Industry.
 To analyze the penetration of Mutual Funds in India.
 To evaluate the growth, challenges and development of mutual funds in India.
 To know the future outlook/prospects of the Indian Mutual Fund Industry

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What is a Mutual Fund?
Mutual fund is an investment avenue for common people, who have willingness and capability to invest
but lack an expert knowledge about investing. The Mutual fund is constituted by collecting the capital
from individual investors at mass level, which is further invested in company shares, stocks or bonds. The
Mutual fund is operated by an experienced portfolio manager, who invests the large amount of individual
investors’ money into different promising avenues. There are several types of Mutual funds available.
i) Closed-End Mutual Funds
The close ended mutual funds issue certain number of shares to the investors. These shares are traded on
major corporate stock exchanges. These types of mutual funds invest their pooled money into a specific
area, sector or industry.
ii) Open-End Mutual Funds
The open-ended mutual funds issue and redeem the shares on a continuous basis. The Net Asset Values
(NAVs) of shared units are bought by the investors and at the same time these could be redeemed at the
available current market price.
iii) Load Funds
The Load funds contain a fee component to be paid by the investors, who buy the units of Mutual fund.
The fee component applied while purchasing of units is called “Entry Load”, whereas the fee component
applied while selling off units by investors is called “Exit Load”.
iv) No Load Funds
The No Load mutual funds do not contain any fee components for investors. Mutual Funds issue
different kinds of shares to its investors. These include the following:
a) Class A Shares
The class A shares charge certain fee from the investors at the time of investment. This amount could be
a certain percentage of the total amount invested. After subtracting the fee amount from total investment,
the remaining amount is used for purchase of shares in the fund.
b) Class B Shares
The class B shares incur the exit fee for the investors. It means that the investors need not to pay any fee
while purchasing the fund. However, at the time of selling off, the investors need to pay certain charge,
which keeps on decreasing by each passing year.

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c) Class C Shares
The class C shares do not levy any fee at the time of purchase of mutual fund by investors. However a
moderate level fee is charged in case the investors sell off within a duration of one year.
Advantages of Mutual Fund
i) Diversification
The mutual fund facilitates diversification in investments. It means that the proportion of the amount to
be invested gets diversified across different avenues, with the help of experienced and expert mutual fund
managers. It results in reduction of risk towards loss which may incur in any particular avenue of
investment.
ii) Simplicity
Simplicity in any investment refers to easy availability of pertinent information which is useful in decision
making towards investment purposes. The mutual fund managers themselves collect the information and
conduct research analysis, which becomes helpful for the investors while making investment decisions.
The readily available information with respect to risk probability, expected returns, entry and exit loads
etc. for different funds makes the task of investment simple for the investors.
iii) Liquidity
Liquidity refers to the possibility of redeeming the mutual fund units into monitory terms. The mutual
funds are considered as better liquid options in investment because it becomes relatively easy for investors
to sell it off and receive money against it in a very short amount of time. Thus the mutual funds provide
better liquidity to its customers as against other investment options.
iv) Cost
One advantage of mutual funds is that these involve lesser cost of investment. These are better investment
options with respect to cost involved, as the mutual fund managers normally charge the amount which
ranges between 1% to 2% of the expense ratio. Therefore, the mutual funds provide a cheaper option of
investment to retail investors.
v) Tax Efficiency
As against other investment avenues, mutual funds carry the advantage of being tax efficient. Certain type
of mutual funds, named as ELSS (Equity Linked Savings Scheme) provide tax exemption up to Rs. 1.5
lakhs to the investors, though such funds come with certain time restrictions in terms of lock-in period.
vi) Professional Management
The mutual funds are managed by experienced and specialist professionals who have years of experience
of fund management. Therefore, the retail investor, who does not have an expert knowledge about finance
and investment may also attempt to invest his/her hard-earned money by
relying on the professional expertise of the fund managers.

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vii) Investment with Small Amount
As against the other available modes of investment, the mutual funds provide an investment opportunity
to people belonging to any income group, as it allows the investment of mount as small as Rs. 500.
Therefore the investor need not to be a wealthy person in order to put his earnings into
mutual fund.
Infographics about the Mutual Fund Sector

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PARAMETERS OF MUTUAL FUND EVALUATION
 Risk
 Returns
 Liquidity
 Expense Ratio
 Composition of Portfolio
Risk Associated with mutual funds
Investing in mutual funds as with any security, does not come without risk. One of the most basic
economic principles is that risk and reward are directly correlated. In other words, the greater the potential
risk, the greater the potential return. The types of risk commodity associated with mutual funds are: -
Market Risk:
Market risk relate to the market value of a security in the future. Market prices fluctuate and are susceptible
to economic and financial trends, supply and demand, and many other factors that cannot be precisely
predicted or controlled.
Political Risk:
Changes in the tax laws, trade regulations, administered prices etc.is some of the many political factors
that create market risk. Although collectively, as citizens, we have indirect control through the power of
our vote, individually as investors, we have virtually no control.
Inflation Risk:
Inflation or purchasing power risk, relates to the uncertainty of the future purchasing power of the invested
rupees. The risk is the increase in cost of the goods and services, as measured by the Consumer Price
Index.
Interest Rate Risk:
Interest Rate risk relates to the future changes in interest rates. For instances, if an investor invests in a
long-term debt mutual fund scheme and interest rate increases, the NAV of the scheme will fall because
the scheme will be end up holding debt offering lowest interest rates.

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Business Risk:
Business Risk is the uncertainty concerning the future existence, stability and profitability of the issuer of
the security. Business risk is inherent in all business ventures. The future financial stability of a company
cannot be predicted or guaranteed, nor can the price of its securities. Adverse changes in business
circumstances will reduce the market price of the company’s equity resulting in proportionate fall in the
NAV of mutual fund scheme, which has invested in the equity of such a company.
Economic Risk:
Economic risk involves uncertainty in the economy, which in turn can have an adverswe effect on a
company’s business. For instance, if monsoons fall in a year, equity stocks of agriculture bases companies
will fall in NAVs of mutual funds, which have invested in such stocks, will fall proportionately.
There are 3 different methods with the help of which we can measure the risk.

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MEASUREMENT OF RISK
I. Beta Coefficient Measure Of Risk:
Beta relates a fund’s return with a market index. It basically measures the sensitivity of funds return to
changes in market index.
If Beta=1,
Fund moves with the market i.e. Passive Fund.
If Beta <1,
Fund is less volatile than the market i.e. Defensive Fund.
If Beta>1,
Funds will give higher returns when market rises & higher losses when market falls i.e. Aggressive Fund.
II. Ex-Marks or R-squared Measure Of Risk:
Ex-Marks represents co-relation with markets. Higher the Ex-marks lower the risk of the fund because a
fund with higher Ex-marks is better diversified than a fund with lower Ex-Marks.
III. Standard Deviation Measure of Risk:
It is a statistical concept, which measures volatility. It measures the fluctuations of fund’s returns around
a mean level. Basically, it gives you an idea of how volatile your earnings are. It is broader concept than
BETA. It also helps in measuring total risk and not just the market risk of the portfolio.
How to calculate the value of a Mutual Fund:
The investors’ fund is deployed in a portfolio of securities by the fund manager. The value of these
investments keeps changing as the market price of the securities change. Since investors are free to enter
and exit the fund at any time, it is essential that the market value of their investments is used to determine
the price at which such entry and exit will take place. The net assets represent the market value of assets,
which belong to the investors, on a given date.
Net Asset Value or NAV of a Mutual Fund is the value of one unit of investment in the fund, in net asset
terms.

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NAV=Net Assets of the scheme / Number of units outstanding
Where Net Assets are calculated as-
(Market value of investments + current assets and other assets + Accured income – current liablities and
other liabilities – less accured expenses) / no. of units outstanding at the NAV date
NAV of all schemes must be caculated and published at least weekly for closed-end schemes and daily
gor open-end schemes.
The major factors affecting the NAV of a fun are:
 Sale and purchase of securities
 Sale and repurchase of units
 Valuation of assets
 Accrual of income and expenses
SEBI requires that the fund must ensure that repurchase price is not lower than 93% of NAV (95% in the
case of a closed-fund). On the other side, a fund may sell new units at a price that different from the NAV,
but the sale price cannot be higher than 107% of NAV. Also the difference between the repurchase price
and the sale price of the unit is not permitted to exceed 7% of the sale price.
Measuring Mutual Fund Performance:
We can measure mutual fund’s performance by different method:
 Absolute Return Method:
Percentage change in NAV is an absolute measure of return, which finds the NAV appreciation between
two points of time, as a percentage.
e.g. if NAV of one fund changes from Rs.20 to Rs.22 in 12 months, then
Absolute return= (22-20)/20 x 100=10%
 Simple Annual Return Method:
Converting a return value for a period other than one year, into a value for one year, is called as
annualization, in order to annualize a rate, we find out what the return would be for a year, if the return
behaved for a year, in the same manner it did, for any other fractional period.
e.g. if NAV of one fund changes from Rs.20 to Rs.22 in 6 months, then
Annual Return= (22-20) /20 x 12/6 x 100=20%

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 Total Return Method:
The total return method takes into account the dividends distributed by the mutual fund, and it to the NAV
appreciation, to rrive at returns.
Total Return=(Dividend distributed + change in NAV) / NAV at the start X 100
e.g. if NAV of one fund changes from Rs.20 to Rs.22 in 6 months if in between dividend of Rs. 4 has been
distributed then
Total Return= (4+(22-20))/20 x 100= 30%
 Total Return when dividend is reinvested:
This method is also called the return on investment (ROI) method. In this method, the dividends are
reinvested into the scheme as soon as they are received at the then prevailing NAV (ex- divedend NAV).
= ((Value of holdings at the end of the period/ value of the holdings at the beginning)-1)*100
e.g. An investor buys 100 units of a fund at Rs.10.5 on January 1 2007. On June 30, 2007 he receives
dividends at the rate of 10%. The ex-dividend NAV was Rs.10.25. on December 31,2007, the fund’s NAV
was Rs.10.25. On December 31, 2007, the fund’s NAV was 12.25.
Value of holdings at the beginning period=10.5*100=1050
Number of units re-invested=100/10.25=9.756
End period value of investment=109.756*12.25=1344.51
Return on Investment = ((1344.51/1050)-1) * 100=28.05%
 Compounded Average Annual Return Method:
This method is basically used for calculating the return for more than 1 year. In this method return is
calculated with the following formula:
A=P x (1+R / 100)^N
Where P= principal invested
A= maturity value
N= period of investment in years
R= Annualized compounded interest rate in %
R=((Nth root of A/P) x 100
e.g.if amount invested is Rs. 100 and in the end we get return of Rs.200 and period of investment is 10
years then annualized compounded return is
200 = 100(1+R/100)^10
Rate=7.2%

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RETURNS:
Returns have to be studied along with the risk. A fund could have earned higher return than the benchmark.
But such higher returns may be accompanied by high risk. Therefore, we have to compare funds with the
benchmarks, on a risk adjusted basis. William Sharpe created a metric for fund performance, which
enables the ranking of funds on a risk adjusted basis.
Sharpe Ratio =
Treynor Ratio =
Risk Premium = Difference between the fund’s average return and risk free return on government
security or treasury bill over a given period.
LIQUIDITY:
Most of the funds being sold today are open-ended. That is, investors can sell their existing units, or buy
new units, at any point of time, at prices that are related to the NAV of the fund on the date of the
transaction. Since investors continuously enter and exit funds are actually able to provide liquidity to
investors, even if the underlying markets, in which the portfolio is invested, may not have the liquidity
that the investor seeks.
EXPENSE RATIO:
Expense Ratio is defined as the ratio of total expenses of the fund to the average net assets of the fund.
Expense Ratio can actually understate the total expenses, because brokerage paid on transactions of a fund
are not included in the expenses. According to the current SEBI norms, brokerage commissions are
capitalized and included in the cost of the transactions.
Expense Ratio =

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COMPOSITION OF THE PORTFOLIO:
Credit quality of the portfolio is measured by looking at the credit ratings of the investments in the
portfolio. Mutual Fund fact sheets show the composition of the portfolio and the investments in various
asset classes over time.
Portfolio turnover rate is the ratio of lesser of asset purchased or sold by funds in the market to the net
assets of the fund.
If portfolio ratio is 100% means portfolio has been changed fully. When portfolio ratio is high means
expense ratio is high.
Portfolio Ratio =
&
In order to meaningfully compare funds some level of similarity in the following factors has to be ensured:
 Size of the funds
 Investment objective
 Risk profile
 Portfolio composition
 Expense ratio
Fund Evaluation against benchmark:
Funds can be evaluated against some performance indicators which are known as bwnchmarks.
There are 3 types of benchmarks:
 Relative to market as whole
 Relative to other comparable financial products
 Relative to other mutual funds
Relative to market as whole:
There are different ways to measure the performance of fund w.r.t. market as Equity Funds.
 Index fund- An index fund invests in the stock comprising of the index in the same ratio. This is a
passive management style.
For example,
Market index Fund - BSE Sensex
Nifty index fund – NIFTY.
The difference between the return of this fund and its index benchmark can be explained by “TRACKING
ERROR”.

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 Active Equity Funds:
The fund manager actively manages this fund. To evaluate performance in such case we have to select an
appropriate benchmark.
Large diversified equity fund - BSE 100
Sector Fund - Sectoral indices
 Debt Funds:
Debt funds can also be judged against a debt market index e.g. I-BEX.
RELATIVE TO OTHER COMPARABLE FINANCIAL PRODUCTS:
SCHEMES RETURN
CONVENIENT
SAFETY VOLATILITY LIQUIDITY
Equity High moderate Low High High
FI Bonds Moderate high High Moderate Moderate
Corporate
debentures
Moderate low Moderate Moderate Low
Company deposits Moderate
moderate
Low Low Low
Bank deposits Low high High Low High
PPF Moderate high High Low Moderate
Life insurance Low moderate High Moderate Moderate
Gold Moderate low High Moderate Moderate
Real estate High low Moderate High Low
Mutual Funds High high High Moderate High

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SCHEME INVESTMENT
OBJECTIVE
RISK TOLERANCE INVESTMENT
HORIZON
Equity Term Capital appreciation High Long
FI Bonds Income Low Medium to long term
Corporate debentures Income High moderate Medium
Bank deposits Income Generally, Flexible all terms
PPF Income Low Long
Life insurance Risk cover Low Long
Gold Inflation hedge Low Long
Real estate Inflation hedge Low Long

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Association of Mutual Funds in India (AMFI)
With the increase in mutual fund players in India, a need for mutual fund association in India was
generated to function as a non-profit organization. Association of Mutual Funds in India (AMFI) was
incorporated on 22nd
August 1995. AMFI is an apex body of all Asset Management Companies (AMC)
which had been registered with SEBI. Till date all the AMCs are that have launched mutual fund schemes
are its members. It functions under the supervision and guidelines of its board of Directors.
Association of Mutual Funds in India has brought down the Indian Mutual Fund industry to be a
professional and healthy market with ethical lines and enhancing and maintaining standards. It follows
the principle of both protecting and promoting the interests of mutual funds as well as their unit holders.
The objectives of Association of Mutual funds in India: ---
The Association of Mutual Fund in India works with the registered AMCs of the country. It has certain
defined objectives which juxtaposes the guidelines of its board of directors. The objectives are as follows:
-
 This mutual fund association of India maintains a high professional and ethical standard in all areas
of operation of the industry.
 It also recommends and promotes the top-class business practices and code of conduct which is
followed by members and related people engaged in activities of mutual fund and asset
management. The agencies who are by any means connected or involved in the field of capital
markets and financial services also involved in this code of conduct of the association.
 AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund industry.
 Association of Mutual Fund of India do represent the Government of India, the Reserve Bank of
India and other related bodies on matters relating to the mutual fund industry.
 It develops a team of well qualified and trained Agents distributors. It implements a programme
of training and certification for all intermediaries and other engaged in the mutual fund industry.
 AMFI undertakes all India awareness programme for investors in order to promote proper
understanding of the concept and working of mutual funds.
At last but not the least association of mutual fund of India also disseminate information on Mutual Fund
Industry and undertakes studies and research either directly or in association with other bodies.

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INDUSTRY ANALYSIS
Porters five forces for the Mutual Fund industry
The five forces that impact industry attractiveness are threat of new entrants, threat of substitute products
and services, bargaining power of buyers and suppliers and the intensity of rivalry amongst existing
players.
Threat of New Entry - Medium
Overall, the threat of new entry is medium. Following are the factors that affect threat of new entry into
asset management business–
• Regulatory requirement by SEBI for entering into asset management business mainly requires of a firm
to have - a sound track record and general reputation of fairness, be carrying on business in financial
services for a period of not less than five years. Most financial institutions satisfy these requirements and
hence we see such a large number of AMCs entering into the business.
• Low start-up costs – start-up costs from the perspective of financials firms are low so we see most
financial institutions have their own mutual funds.
• As units of existing financial houses, new entrants are able to sustain losses for long periods. This means
that inefficient players would continue to operate in the industry eating a pie of AUM.

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• MF benefits from sharing intangible assets like brand names and know-how with parent/JV firms which
new entrants can exploit. These economies aid entry of new players into the market.
• As observed during snapshot analysis revenues of AMCs are highly dependent on AUM. So it is
observed that existing firms with high performing funds do not tend retaliate in a way that threatens
potential new entrant/s.
Intensity of Rivalry among Existing Competitors – High
For the following reasons intensity among the existing rivals is very high.
• A close observation indicates that there are three classes of AMCs. AMCs holding high, medium and
low AUM. Each category of AMC has a few highly competitive firms operating. This equally balanced
competition at high, medium and low AUM levels do not allow one or two firms to dominate the market
place and ensure highly competitive behaviour from each AMC so as to attract higher share of AUM.
• Highly skewed geographic distribution of total AUM in favour of top 5 cities in India, implying that
AMCs have to deploy their limited resources in these geographic areas. As all the AMCs are fighting for
the same pie of market potential (i.e., AUM), the industry has become highly competitive.
• Investors take more care with making their investments initially than with monitoring subsequently, i.e.,
the sensitivity of the aggregate performance to outflows due to performance is quite a bit lower than that
of inflows. So, it becomes very important for AMCs to focus primarily on customer acquisition.
• Diverse competitors – AMCs who are endowed with powerful financial firms as parents are working
with different investment strategies which lead to highly competitive rivalry at the ground level.
• High Fixed Costs – Costs and time involved in creating fixed assets are high which puts pressure on
margins and reduces profitability/increase losses. This creates high rivalry as all the firms try to increase
AUM even if it means lower operating efficiency to minimize losses or maximize profitability in future.
• As the information related to fund performance and comparison of performance of various funds is
readily available, high performing funds seem to be attracting more AUM over a period of time. This
gives competitive advantage to good performing funds. This causes AMCs to invest more towards
knowledge management and attract good talent for fund management, putting additional pressure on
margins.
• Mutual fund distribution channels create a significant impact on fund performance. Indirect channels
distribute underperforming funds and charge a premium on distribution cost. This puts additional pressure
on margins. Direct and indirect channels distribute actively managed funds with equal or higher
performance than passive funds which have uniform performance across the industry (as they are standard
funds like index funds requiring low asset manager intervention).
• Geographic distribution of mutual funds is highly skewed towards to 8 to 10 cities. The cost of creating
distribution network and entering other regions for mutual funds are very high. These high costs act as

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deterrent for one single AMC to strategically enter this region. This means further investment in existing
geographic areas and adds further to competitive rivalry.
Buyers Behaviour (Bargaining Power of Buyers) – Moderately
High the end buyers are largely concentrated to the top 8 cities of India. They may be categorised as
individual and institutional buyers. There is lack of awareness in the individual buyers and they tend to
rely on the advisory services of the distributors. As compared to the fund houses, these buyers intuitively
seem to be fragmented and per se, don’t have a significant bargaining power.
A close look, on the other hand, offers a very different picture. Some figures of the note on Indian AMC
industry indicates that 73.8% of the retail sales are contributed by corporate houses and the HNIs, making
them a concentrated set of buyers. Informed buyers have access to a wealth of information over internet
and television that allows them to compare different products and their charges, easily allowing them to
take informed decision. So it requires higher costs to push the products that have medium to low
performance putting higher pressure on margins.
There is another category of buyer here – the channel partners. Strictly speaking, the channel partners
don’t purchase the services before reselling those to the end customers. However, the channel partners
have a significant say in the sales choice of the end customers. There are three categories of channel
partners – banks, independent financial advisors and national distributors. The banks and national
distributors enjoy a captive customer base and tend to push the products of those AMCs that are
subsidiaries of their own parents. This thereby increases the bargaining power buyers. Furthermore, 75%
of agents are located in 20% of districts (thus not very fragmented) and this contributes to a further increase
in their bargaining power.
Threat of Substitutes - High
There are three categories of substitutes for mutual fund products – life insurance (for wealth transfer),
bank fixed deposit (for wealth preservation) and self-investment in equity/real estate (for wealth creation).
Investment in debt-oriented mutual funds indicates that investors are focussed on wealth preservation.
This creates a high threat of substitutes for other categories of mutual funds. Further, bank fixed deposits
have always been the flavour of the Indian retail investor thereby increasing the threat of substitution of
debt mutual funds as well.

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Bargaining Power of Suppliers – Moderately High
The only supplier category that is relevant to the mutual fund industry is trader. Traders/dealers are the
actual people who trade in the markets and ensure that the returns of the funds of their companies are
higher than that of competitors. In India, qualified finance professionals in this field are in short supply
and often demand a premium for retention.
Overviews of these five forces that decide the industry attractiveness are:
Competitive Rivalry
Equally balanced competitor pushes each other to grab higher share of AUM.
• Threat of New Entrants (MEDIUM)
Low entry barriers and strong financial
strength allows MFs to survive initial losses
and build stronger AUM and a base of fixed
asset.
Bargaining power of Suppliers (MODERATELY
HIGH
Traders/Dealers put high pressure on MFs by
demanding premium compensation terms for
retention.
Threat of Substitutes (HIGH)
Substitutes place higher pressure on MFs by
reducing their total AUM.
Bargaining power of Buyers (MODERATELY HIGH)
Buyers weigh safety against returns across
different industries based on need for wealth
transfer, preservation or distribution.

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INFORMATION ABOUT SPONSORS, AMC AND TRUSTEE COMPANIES
A. Constitution of the Mutual Fund
Union Mutual Fund (“the Mutual Fund” or “the Fund”) has been constituted as a trust on December 1,
2010 in accordance with the provisions of the Indian Trusts Act, 1882 (2 of 1882) with Union Bank of
India and Dai-ichi Life Holdings, Inc. as the Sponsors, and Union Trustee Company Private Limited as
the Trustee. The Trust Deed has been registered under the Indian Registration Act, 1908.
The Mutual Fund was originally registered with SEBI on March 23, 2011 under Registration Code
MF/066/11/01.
The Mutual Fund was originally co-sponsored by Union Bank of India and KBC Participations Renta, a
100% subsidiary of KBC Asset Management NV. Union Bank of India acquired the entire
shareholding held by KBC Participations Renta in Union Asset Management Company Private Limited
and Union Trustee Company Private Limited, which constituted 49% (forty-nine per cent) of: (a)
the paid-up equity share capital of Union Asset Management Company Private Limited; and (b) the paid-
up equity share capital of Union Trustee Company Private Limited. The Board of Directors of Union Asset
Management Company Private Limited and Union Trustee Company Private Limited approved the
aforesaid transfer of shares on September 20, 2016.
Pursuant to the above change in shareholding, Union KBC Mutual Fund was renamed as Union Mutual
Fund, and SEBI vide its letter dated November 08, 2016 issued fresh Registration Certificate
No. MF/066/11/01 dated November 08, 2016 in the name of Union Mutual Fund and cancelled the old
Registration Certificate No. MF/ 066/11/01 dated March 23, 2011 in the name of Union KBC Mutual
Fund. Subsequently, pursuant to the Investment and Subscription Agreement between Union Bank of
India, Dai-ichi Life Holdings, Inc. and Union Asset Management Company Private Limited, Daiichi
Life Holdings, Inc. had on May 17, 2018, invested in Union Asset Management Company Private Limited
to the extent of 39.62% of the post issue share capital of Union Asset Management Company Private
Limited, on a fully diluted basis, subject to relevant terms and conditions. Pursuant to this investment,
Dai-ichi Life Holdings, Inc. holds more than 40% of the net worth of Union Asset Management Company
Private Limited. Consequently, Union Bank of India and Dai-ichi Life Holdings, Inc. have become Co-
sponsors of Union Mutual Fund.

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B. Sponsors
Union Mutual Fund is sponsored by Union Bank of India and Daiichi Life Holdings, Inc. Union Bank of
India is the settlor of the Mutual Fund Trust. The Mutual Fund was originally co-sponsored by Union
Bank of India and KBC Participations Renta, a 100% subsidiary of KBC Asset Management NV. Union
Bank of India (Sponsor) and KBC Participations Renta (erstwhile co-sponsor) have entrusted a sum of `
1,00,000 each to the Trustee as the initial contribution towards the corpus of the Mutual Fund.
Union Bank of India is one of the leading public sector banks in India, registered on November 11, 1919,
headquartered in Mumbai. As on May 31, 2019, the Bank has a network of about 4287 domestic branches,
3 foreign branches, 1 representative office, 1 overseas subsidiary office and around 65 million customers.
Moreover, all of these branches are integrated under the Core Banking Solution. Union Bank of India is
the first large public sector bank in the country to have implemented 100% networking of branches.
Dai-ichi Life Holdings, Inc. ("Dai-ichi Life") is a stock company with limited liability, incorporated under
the laws of Japan in the year 1902 and listed on the Tokyo Stock Exchange. Dai-ichi Life is a financial
service holding company engaged in carrying out both insurance and non-insurance (including asset
management) businesses through various subsidiaries and affiliated companies.
Over the past 10 years, Dai-ichi Life has expanded its business globally and is currently engaged in the
life insurance sectors of 6 jurisdictions other than Japan. In addition to the life insurance business, Dai-
ichi Life is also engaged in the business of asset management and has setup a trilateral business structure
to cover the asset management markets of Japan, Europe and USA. Daiichi Life carries out asset
management business in Japan and overseas through its group company /affiliates, Asset Management
One Co. Ltd. and the Janus Henderson Group. Asset Management One Co. Ltd. and Janus Henderson
Group are emerging global asset management companies that provide customers with high quality
products and services. Dai-ichi Life is a committed and reputable player in the insurance and asset
management business.

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Indian Mutual Fund Industry: Current Scenario
The Indian Mutual Fund Industry is one of the fastest growing sectors in the Indian capital and financial
markets. The mutual fund industry in India has seen dramatic improvements in quantity as well as quality
of products and services offering in recent years. Mutual funds as an investment vehicle have gained
immense popularity in the current scenario, which is clearly reflected in the robust growth levels of Assets
under Management. The Indian Mutual fund industry has witnessed considerable growth since its
inception in 1963. The assets under management (AUM) have surged to Rs.23,93,486 crore on April 30,
2020, from just Rs 25 crores in March, 1965. The impressive growth in the Indian Mutual Fund Industry
in recent years can largely be attributed to various factors such as rising household savings, comprehensive
regulatory framework, favorable tax policies, and introduction of several new products, investor education
campaign and role of distributors.
In the last few years, household’s income levels have grown significantly, leading to commensurate
increase in household’s savings. The considerable rise in household’s financial savings, point towards the
huge market potential of the Mutual fund industry in India. Besides, SEBI has introduced various
regulatory measures in order to protect the interest of small investors that augurs well for the long-term
growth of the industry. The tax benefits allowed on mutual fund schemes (for example investment made
in Equity Linked Saving Scheme (ELSS) is qualified for tax deductions under section 80C of the Income
Tax Act) also have helped mutual funds to evolve as the preferred form of investment among the salaried
income earners.
The AUM of the Indian MF Industry has grown from ₹ 8.09 trillion as on 30th April, 2010 to ₹23.93
trillion as on 30th April, 2020 about 3-fold increase in a span of 10 years.
The MF Industry’s AUM has grown from ₹ 11.86 trillion as on 30th April, 2015 to ₹23.93 trillion as on
30th April, 2020, more than 2-fold increase in a span of 5 years.
The Industry’s AUM had crossed the milestone of ₹10 Trillion (₹10 Lakh Crore) for the first time in
May 2014 and in a short span of about three years, the AUM size had increased more than two folds and
crossed ₹ 20 trillion (₹20 Lakh Crore) for the first time in August 2017. The Industry AUM stood at
₹23.93 Trillion (₹ 23.93 Lakh Crore) as on 30th April, 2020.
The total number of accounts (or folios as per mutual fund parlance) as on April 30, 2020 crossed a
landmark of 9 crore and stood at 9.04 crore (90.4 million), while the number of folios under Equity,
Hybrid and Solution Oriented Schemes, wherein the maximum investment is from retail segment stood
at about 8 crore (80 million). This is 71st consecutive month witnessing rise in the no. of folios.
Besides, the Indian Mutual fund industry that started with traditional products like equity fund debt fund
and balanced fund has significantly expanded its product portfolio. Today, the industry has introduced an
array of products such as liquid/money market funds, sector-specific funds, index funds, gilt funds, capital
protection-oriented schemes, special category funds, insurance linked funds, exchange traded funds, etc.
It also has introduced Gold ETF fund in 2007 with an aim to allow mutual funds to invest in gold or gold
related instruments. Further, the industry has launched special schemes to invest in foreign securities. The
wide variety of schemes offered by the Indian Mutual fund industry provides multiple options of
investment to common man.

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Mutual Fund Screener
Industry AUM tumbles more than 6% y-o-y in FY20
 Industry Assets Under Management (AUM) declined 6.4% y-o-y due to market volatility; and high
debt redemptions amid credit downgrades and introduction of exit load in liquid funds.
Unprecedented situation arising from novel coronavirus severely impacted AUM in Mar-20
 AUM for open-ended debt funds plunged 8.8% q-o-q, with liquid, ultra-short and money market
funds posting highest fall. AUM for open-ended equity schemes declined 24.9% with huge drop
in large cap, multi cap and ELSS
 However, QAAUM grew 10% y-o-y and 1% q-o-q as Jan-20 and Feb-20 AUM remained high
Industry QAAUM was Rs. 27.04 lakh crore in Q4FY20
 Industry’s QAAUM improved 1% versus Q3FY20 supported by strong inows in overnight and
liquid schemes in Jan-20 and steady inows in equity schemes
 However, deep market corrections and rapid spread of coronavirus in Mar-20 capped QAAUM
growth
 Among the top 10 fund houses, Axis and SBI reported the highest q-o-q growth in QAAUM, while
Franklin Templeton and UTI suffered the steepest decline

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Industry sees huge debt outflows towards FY20 end
 Industry saw heavy outows in Q4FY20 relative to healthy in flows in Q3FY20 due to market
volatility that led to high redemptions, particularly in debt funds
 Downgrade of debt securities and default by few NBFCs triggered redemptions in credit risk funds.
Withdrawal by foreign institutional investors amid market volatility and Covid-19 outbreak
increased outows
 Corporates, too, pulled out from liquid funds in Mar-20 to meet advance tax payments and near-
term operational needs. Liquid and money market funds’ redemption stood as high as Rs. 548,864
crore in Mar-20

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Equity saw net inflows in Q4FY20
 Equity inows were encouraging and March recorded highest net inows for FY20
 Infows were mostly through SIP route. Investors poured money into multi caps, large caps and
mid caps which made a combined contribution of Rs. 14,919 crore of the total net inows in
Q4FY20
Individual investors make for more than half the mutual fund industry’s AAUM
 Individual investors, comprising retail investors and High Networth Individuals* (HNIs), have
grown more than institutional investors’ in the past ve years
 As of Mar-20, individual investors made for around 52% of the AAUM, while institutional
investors, mostly comprising corporates, accounted for the remaining AAUM

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Portfolio turnover remains high for Institutional Investors
 Individual investors held 52% of their equity investments for - 12 months in Q4FY20 versus
54% in Q3FY20, whereas, institutional investors held 13%, thereby remaining steady q-o-q
 Individual investors held 20% of their non-equity investments for - 12 months in Q4FY20 versus
18% in Q3FY20, whereas, institutional investors held 22% versus ~20%

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Investment into SIP schemes stayed above Rs. 8,000 crore mark for 16th
consecutive
month
 Mutual Funds collected Rs. 100,084 crore in FY20 through the SIP route compared with Rs. 92,693 crore
in FY19
 Investors stayed the course even as liquidity was drying up during the year end amid the pandemic
AAUM contribution from B30 cities shows steady y-o-y growth
 Penetration is low in ‘beyond the top 30 cities’ (B30) but has shown steady growth over the
years. The untapped territories offer opportunity for the mutual fund industry
 B30 shows more inclination towards equity. As on Mar-20, more than 62% of the industry
AAUM coming from B30 was in equity vis-à-vis 43% from T30
 Distributors (Associate and Non-Associate Distributor) contributed 50% and 79% of AAUM in
T30 and B30 cities, respectively in Mar- 20

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Regulatory Actions amid Covid-19 pandemic
 Stewardship Code deadline extended- SEBI extended the deadline for implementing the
Stewardship Code for MFs and AIFs from Apr 1, 2020 to Jul 1, 2020 considering the prevailing
situation arising from the Covid-19
 Ease in compliance timelines- Amid the recent events owing to Covid-19, SEBI eased compliance
timelines for AMCs. Disclosure of half yearly unaudited financial results has been extended to
May 31, 2020. Yearly disclosures of investor complaints have been relaxed to Jun 30, 2020
 Temporary relaxation in some policy initiatives- SEBI has temporarily relaxed the implementation
date to Jun 30, 2020 for some policy initiatives including the risk management framework for
liquid and overnight funds, review of mutual fund investment norms for debt and money market
instruments and valuation of money market and debt securities
 Transaction of mutual funds through stock exchange- SEBI permitted investors to use the stock
exchange platform to transact in mutual funds. The step may need the recognised stock exchanges,
clearing corporations and depositories to amend their existing byelaws, rules and regulations
 RBI decides to conduct TLTROs- In the seventh bi-monthly monetary policy meeting for FY20
on Mar 27, 2020 (preponed from Apr 3, 2020), RBI decided to conduct Targeted Long-Term Repos
Operations (TLTROs) of up to three years tenor of appropriate sizes. It also decided to reduce the
cash reserve ratio (CRR) of all banks by 100 bps to 3% of net demand and time liabilities and the
requirement of minimum daily CRR balance maintenance from 90% to 80%
 NFO letter validity kept at 1 year- NFOs where SEBI issued an observation / final observation
letter, the regulator has kept a validity period of one year from the date of the letter in view of the
prevailing Covid-19 scenario

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CHALLENGES AND ISSUES FACED BY INDIAN MUTUAL FUND INDUSTRY
While the Indian mutual fund industry has grown at an impressive rate during the last few years, the recent
developments of the past few months triggered by the global financial crisis have impacted the fortunes
of the industry resulting in AUM decline, adversely impacting revenue and profitability. In my study on
the "mutual funds industries dynamic environment" has attempted to identify some of the key issues and
challenges faced by the industry participants that are preventing the industry from harnessing its true
growth potential.
A) Customer Education & Engagement:
• Still not many investors are aware & educated about the benefits of the mutual fund investing.
• Industry and AMFI organizing various types of investor awareness seminars & workshops.
• Improve the financial literacy & financial inclusion of the people.
• Certified financial planners with proper training should be used to educate people & taking care
of the long-term financial health of the investors.
• Providing or recommending customized fund portfolios satisfying the particular needs of the
customer.
• Education of risk-return, asset allocation, fund objective, different loads/expenses involved,
portfolio diversification, regular or lump sum investment, fund switching, timely redemption etc.
Continuous engagement with the customer is required even after the sale of the fund. For this the fund
charges should not be only upfront charges and there should be scope of incentives for better performance
of the fund.
B) Customer Centered:
• The industry is product centered not customer centered & falls short of expectations in meeting
their needs at time of economy uncertainty and market volatility.
• A large number of mutual funds schemes makes investment decision complex and difficult. This
leads them to stay away from the market.
• Complicated Know Your Customer (KYC) norms, PAN card requirement, submission of many
documents, extensive paperwork etc. restrict potential investors.
• Requirements should be simplified and the process should be made more customers friendly.
• The service provided to the customer should also be satisfying.

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Geographic Penetration of Industry Assets
The mutual fund industry remains concentrated in a few states, with the top five states accounting for 72%
of total industry AUM. Within states, Maharashtra accounts for 43% of the total assets as of March 2017,
though its share has fallen from 47% in March 2014.
Asset allocation of the top five states shows Gujarat has higher preference for equity-oriented funds
(including balanced funds), which accounts for 44% of its total assets, the highest among the top five
states. Maharashtra has more balanced allocation among equity, debt and money funds, while in Haryana
65% of the assets are in debt-oriented funds

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State-wise/ union territory-wise asset distribution
Blue colour denotes top five states by assets
Numbers below 0.05% have not been shown on the map
Source: AMFI

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Geography: Rise of B30 and Eventually B100
The B15 regions saw their contribution to AuM rise from ~13% in FY’13 to ~25% in FY’19. SEBI’s
recent relabeling of regions from T15 and B15 to T30 and B30 is reflective of this growth. B30 registered
an even faster growth than B15, with its contribution to AuM rising from <8% in FY’13 to 21% in FY’19.
However, despite recent growth, mutual fund penetration in B15 continues to be low when compared to
other savings products. Only 25% of mutual fund AuM comes from B15, as opposed to ~70% for savings
deposits, ~58% for retail loans and ~40% for current deposits.
Customer Segments—Increasing Relevance of Middle of Pyramid
Until now, asset management players have largely focused on households at the top end of the income
pyramid (>INR 10 lakh household income), and located in metros and tier 1 cities. Estimation indicates
that most of the current ~2 crore investors are in the affluent (INR 10-50 lakh household income) or HNI
(> INR 50 lakh household income) category, and located in metro and tier 1 cities. Currently there are
about 10 million households in this income and geographic category out of the total 275 million
households in India. If we assume that 75% of these 10 million households have some exposure to mutual
funds and ~5% of the remaining 265 million households have some exposure to mutual funds, it would
translate to ~20 million households with mutual fund exposure out of the total 275 million households in
the country. This would mean a mutual fund penetration of ~7% of the 275 million households as of 2018.

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While there has been a positive shift in overall household penetration, it is important to improve the
penetration levels in the middle of the income pyramid. The >INR 10 lakh income segment accounted for
~10% of all households while the INR 3-10 lakh income segment accounted for ~37% of all households
in 2018. These figures are expected to increase to 17% and 46% respectively by 2025.
Overall, the mutual fund industry has seen a large shift across multiple dimensions:
 Individual investors growing faster than institutions with over 58% share in industry AuM
 Equity overtaking other asset classes to become the prominent asset class
 Digital gaining traction, however, retail and HNI investors continue to rely on intermediaries
 B30 and B100 cities experiencing breakout growth and well placed for future growth with
regulatory enablers
 Middle segment of the income pyramid to be increasingly relevant in future
The attributes outlined above will be important to create an appropriate platform for the future growth of
the industry.

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WINNING THE TWENTIES—₹ 100 TRILLION
The Indian mutual fund industry has seen tremendous growth in the last few years. However, the industry
continues to be under-penetrated as compared to other large nations. AuM of mutual funds as percentage
of GDP is at half or one third of other developed countries like US, Canada & UK and emerging markets
like Brazil. Further, estimation indicates that the mutual fund penetration across all Indian households is
at <10% today. The low geographic penetration in B30 cities where nearly 90% of Indian households are
located as well as low levels of investor awareness are factors indicative of the significant growth potential
for the asset management industry. It is also under-penetrated in comparison with other financial services
in India such as banking and insurance. India’s asset management industry has the potential to reach INR
100 trillion of AuM in the twenties.
The above milestone, if achieved by the mid-twenties, could catapult India’s global ranking to 11-13 from
a ranking of 17 at the end of 2018, based on AuM.
Achieving the INR 100 trillion milestone will require a significant shift in the shape of the industry. Such
a significant shift will include:
 A 5x increase in investor base from 2 crore investors today to 10 crore investors
 Adding ~4 lakh new channel partners and investing in building a sustainable distribution network
 Equity to constitute >50% of AuM (vs. 45% share today)
Reaching the 100 trillion vision will require various kinds of market expansion as shown:
1. Distribution outreach—increasing reach beyond metros and tier 1 cities
2. Inclusion through simplification—expanding coverage to middle income households
3. Deeper penetration into the savings wallet of existing and new investors.
Distribution Outreach—Increasing Reach Beyond Metros and Tier 1 Cities
Reaching the 100 trillion AuM milestone will mean adding about 8 crore new investors. The current
investor base as well as distribution footprint are largely concentrated in metro and tier 1 cities. This is
reflected in the ~75% share of the T15 cities in the overall industry AuM. Currently, the difference in the
ARN density across T15 and B15 cities is almost 18x. T15 cities have ~4,300 ARNs for every million
households as against ~230 ARNs for every million households in B15 cities. As the industry looks at on-
boarding investors beyond tier 1 cities, this gap in distribution density will need to be brought down
significantly by setting up more channel partners in other cities.
A significant part of the 8 crore new investors will be on-boarded from smaller towns—not only from
B30, but also from B100 cities. Limited awareness about mutual funds amongst these new investors
implies that a high touch engagement model will be required to guide, educate and assist these customers.
This will necessitate the need for physical presence in such locations in the form of AMC branches or

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channel partner presence. Expanding the distribution network beyond metros and tier 1 cities will require
a combination of investing in a captive branch network, leveraging partnerships and identifying new
channel partners with a local presence. There is scope to explore partnerships with a large variety of
players including India Post, regional rural banks as well as business correspondents for last mile
fulfillment. Leveraging digital and increasing the direct presence of AMCs will also be necessary to reach
tier 3 and tier 4 locations. In addition to creating the distribution network, investing in customer awareness
in such locations will be crucial in ensuring meaningful utilization of this network. Given the geographic
diversity across the country, communication with the masses in local languages will be a core necessity
of these campaigns to enhance awareness. The success of ‘Mutual Fund Sahi Hai’ campaign
demonstrates the success of using local languages in communication as well as in marketing.

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Inclusion Through Simplification— Expanding Coverage to Middle Income Households
Currently, the mutual fund industry is largely focused on the HNI and affluent segments (> INR 10 lakh
income), that account for just 10% of households. The middle-income pyramid (households with INR 3-
10 lakh income per annum) constituted about 37% of households in India in 2018 and is expected to
account for nearly 46% of households by 2025. As the industry looks at expanding its investor base from
the current 2 crore to 10 crores, bringing the middle- and lower-income households into the mutual fund
fold will be a key imperative. Improving the penetration of mutual funds into middle- and lower-income
households will require significant simplification of the current products as well as the on-boarding
processes. The mutual fund industry today offers over 1000 schemes, ranging across asset classes,
strategy, risk return profile, etc. Moreover, the industry is laden with complex jargon around product
strategies, expense ratios, returns, etc. This difficult jargon along with the wide range of product offerings
and extensive KYC paperwork often discourages first time investors from switching from the simple
traditional investment products such as bank deposits. A dedicated effort needs to be made to create
innovative and simple products that fulfill the needs of this segment. Industry can look at global examples
of ‘solution or goal oriented’ offerings to tap into this segment. Some AMCs are already offering benefit-
linked MF offerings such as linkages with insurance and medical payment. FinTech’s like Goal wise have
based their entire sales and distribution model around goals that range from tax savings to child education,

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vacation, weddings, etc. The middle-income segment will need significant simplification of product
terminology and the on-boarding process. Standardization of KYC norms (across CKYC, KRA, eKYC)
along with digitization of RTAs can enable a more seamless on-boarding experience and better customer
engagement.
Deeper Penetration into Savings Wallet of Existing and New Investors
Despite the breakout growth in the industry over the last 15 years, mutual funds in India account for only
6% of the gross financial savings of households. Savings deposits and fixed deposits still account for
nearly 40% of the financial savings. Mutual fund AuM of individual investors accounted for just 15% of
the total savings and fixed deposits in the banking industry, reflective of the large headroom available for
growth. One of the key imperatives for the industry to achieve this vision will be to increase the share of
mutual funds in the financial savings basket of the 2 crore customers who already hold such funds. The
relatively low share of debt mutual funds (<25%) in individual investors’ AuM and low penetration of
MF as percentage of banking deposits offer an opportunity to enhance the MF share in the savings basket.

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A focused awareness campaign may be needed to highlight the benefits of debt-oriented funds vis-à-vis
other debt investment products like fixed deposits. Other key drivers to improve penetration include
ensuring that the existing investors stay invested even during turbulent times; a continued push towards
stickier products such as SIPs for the retail segment; and increasing awareness about sophisticated
offerings such as PMS and AIFs among the affluent and HNI segments. These initiatives will be important
to deepen the share of asset management products in the savings wallet. India still lags behind its global
peers in terms of penetration of alternatives (including PMS). The HNI segment will require dedicated
wealth offerings customized to their needs. The top of the pyramid is served by a variety of advisors;
however, the mid, affluent and lower end of the HNI segment is significantly under-served with sub-par
advice and service. The above three strategies, in my opinion, can enable the industry to achieve the 100
trillion potential over the next decade. It is estimated that when this happens, the industry will cover nearly
20% of Indian households.

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Key trends and opportunities
With lower bank interest rates and demonetization, the AUM of the Indian MF industry are expected to
touch 20 lakh crore INR sooner than expected.15 Investors are increasingly concerned about keeping their
surplus funds in savings bank accounts and the use of digitization has made the industry more appealing.
The industry will see robust growth in the next 2–3 years, driven by opportunities in the following areas:
Digitalization and digitization
 Improved distribution efficiencies have enhanced reach across the country as distributors can now
provide ready analysis to customers on the field.
• Range of mobile and online apps for tracking and transacting—end-to end platforms have enabled
seamless customer experience.
• Mutual fund utility (MFU) has allowed investors to place orders with multiple AMCs and transfer
funds seamlessly, all through a single window.
• e-KYC using Aadhar has proved to be a game changer for online investing; in the future,
technology platforms and Aadhar will be leveraged for various government schemes.
• Increasing use of robo-advisory has made it simpler for investors to make decisions.
• Redemption of MFs (ultra-short funds) using a debit card—offered by two popular robo-advisory
platforms, as well as top fund houses have made the transaction process more convenient.
Government initiatives and regulatory push
• Demonetization has created a surge of inflows into structured investments such as MFs.
• Advisory regulations have allowed investors to get into advisory-only arrangements with financial
advisors.
• Capping of MF commissions will help to prevent mis-selling; it also promotes innovation in
customer acquisition and enables cost efficiencies.
• Special commissions for MF distribution in below 15 cities will increase penetration.
• SEBI has proposed allowing the sale of MFs through leading e-commerce websites.
• Introduction of payments banks and small finance banks has improved financial inclusion.
• SEBI had recommended that the period of holding in respect of long-term debt fund units be
reduced to one year from the existing 3 years, and an increase in the investment limit for tax-saving
MF schemes. However, this has been shelved till a later date.

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Consolidation, specialty products and alternative investment options
• Debt funds dominate the Indian markets; however, with increasing investor education, equity funds have
witnessed an increase in the past 2 years.
• SEBI has taken the initiative to consolidate fund houses and schemes to facilitate better understanding
and increased investment.
• To promote investment in the semi-urban and rural parts of the country, fund houses are focusing on
specific schemes for customers in these parts of the country.
• Within alternative investment funds (AIFs), exchange-traded funds (ETFs) are likely to be one of the
main products to drive significant growth, propelled by the deflationary impact to rates from the blow of
demonetization.
• Recently, SEBI has relaxed the norms for real estate investment trusts (REITs)— allowing them to invest
a larger portion of their funds (up to 20% from the current level of 10%) in assets under construction,
along with proposed changes to facilitate easier entry for offshore fund managers.

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Emerging products and building new capabilities
The past year has been significant for the Indian MF industry. Both retail and institutional AUMs have
shown strong growth numbers, with an increasing number of Indians now considering MFs as part of their
regular investment choices.
Our analysis shows that several factors will boost the growth of investable assets in MFs:
• The rise in retirement savings as the ageing of population continues
• The shift in emerging markets from savings to investing cultures
• The rise in wealth accumulated by High-net-worth individuals (HNWIs) and mass affluent
• Greater demand for a shift towards alternative investments
In a heavily crowded Indian MF industry with more than 2,000 schemes, MF offerings are highly
commoditized.
To create differentiation, the industry is looking to introduce new products. Since the beginning of this
year, draft papers for approximately more than 6416 new fund offers (NFOs) have been filed with SEBI
to tap into the growing demand from retail investors. These filings include offerings around hybrid funds,
retirement-focused funds, fixed maturity plans (FMPs) and simpler funds with Hindi names to connect
with rural investors.
While the debate about Indian AMCs accessing the domestic pension corpus will continue, a significant
portion of global pension and insurance funds is allocated for investment in Asian capital markets,
including India. The opportunity to render investment advice to such fund managers is immense.
It is estimated that 17–20% of Indian market capitalization is held by foreign funds. However, a
remarkably small fraction of these funds is advised and managed by Indian asset managers.
Industry peers across the globe employ a more extensive solution offering and thus are able to tap a wider
basket of investors. Trends indicate that the real estate sector draws a lot of the investible surplus from the
HNWI segment.
The potential introduction of the REITs and infrastructure investment trusts is likely to permit investors
to participate in the yield products of the sector.

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Trends in product innovation by Indian Mutual Funds
Among the various factors influencing fund choices of investors, fund performance continues to hold the
highest weightage.
Indian fund houses are looking to introduce newer products or variants as well as re-launch old schemes
with different flavors so as to generate superior returns and provide greater flexibility and convenience to
investors.
SIPs, which have previously seen the most interest from retail investors, are also witnessing some new
variations.
Wealth managers and distributors are advising clients to invest in SIPs that work differently from the
current system of investing on the same day every month, as lump sum investments and SIPs made in
various equity scheme categories are showing losses. A number of similar SIP variations are being offered
by fund houses with the objective of improving fund performance for investors.
Linking of investments to debit cards has recently gained popularity. This innovation could replace a
customer’s bank account with a higher yielding liquid fund. A debit card allows investors to spend the
money that they have invested in MFs without going through paperwork and the delays typically
associated with withdrawal from a scheme.
The card allows both cash withdrawals as well as purchases at various points of sale in a manner similar
to debit cards linked to a bank account. The card can also be used at ATMs for checking the balance or
total value of investments. It can currently be linked to both equity and debt schemes, and allows for
withdrawals from the same subject to daily limits.
Product innovations in ETFs have also found traction amongst investors.
There is a specific product which allows investors to invest in a gold ETF even without a demat account.
Distributors selling ETFs often face an issue due to a dearth of demat accounts with investors, a
prerequisite to hold ETF units. The industry therefore developed a product which allows investors to use
the MF route to invest in gold, even in the absence of a demat account.
Such funds collect money from investors and act in the same manner as a feeder fund, investing on behalf
of investors into the ETF.
The investors put their money into these gold savings funds and are issued units. The fund in turn holds
the units issued by the ETFs. At the time of redemption, the fund can sell its ETF holding and pay back
the investor.

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COMPARISION OF BANK V/S MUTUAL FUND
BANKS MUTUAL FUNDS
Returns Low Better
Administrative expenses High Low
Risk Low Moderate
Investment options Less More
Network High penetration Low but improving
Quality of assets Not transparent Better transparency
Interest calculation Minimum balance between 10th
and 30th
of every month
Based on NAV
Guarantee Maximum Rs.1 lakh on deposits As per market

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DISTRIBUTION NETWORK
Mutual funds in India have a very widely dispersed distribution. According to SEBI figures, there are
more than 124,000 distributors of funds and over 1,130 investment advisers registered, both as at 31 March
2019. Mutual funds companies may employ their own sales teams (not included in the above numbers),
and may also seek third-party fund distribution. Banks, insurance companies and many other financial and
wealth managers are all involved in distribution. Many banks primarily focus on their proprietary
products, although some are now embracing “open architecture” fund distribution. International banks are
also substantial distributors of mutual funds as part of their wealth management offering in bank branches.
In 2015, India’s Ministry of Finance issued a report that reviewed perceived mis-selling practices and
sought to rationalize the various distribution incentives paid on financial products. The report drew up
many recommendations and made multiple conclusions regarding the broad range of financial product
distribution practices. For the mutual funds industry, the primary recommendation was for there to be an
immediate ban on front-loaded commission payable from fund managers to fund distributors. This was
introduced and had an immediate impact on the industry with a significant reduction in the volume of
sales.
Following requests from the industry, the total ban on commissions was amended, and in 2018 the
regulator SEBI introduced further revisions. Initially this had a negative impact on the number of fund
distributors, but as the limitations on commissions became resolved and better understood, mutual funds
distribution has returned to being strongly supported across the whole of India. Given the wide diversity
of Indian languages, it is expected that the top fund managers establish local offices in the many centres
around the country to service the needs of local distributors in each region. It has proven a challenge trying
to provide adequate and competitive service countrywide using just a few locations. This can be costly
too, especially in keeping top quality staff.
Retail through Agents
The alternative distribution channels that are available are selling, or using lead managers and brokers
along with sub-brokers, for selling units. The experience of mutual fund asset management companies are
that, if necessary motivation and incentive is provided to the retailer agents, they are likely to be more
successful than the lead managers. This is because, there is a sense of loyalty amongst agents, in
anticipation of getting continuous business throughout the year, and the trust and credibility that has been
generated or will be generated by being loyal to one institution. Statistics reveal that the wastage ratio of
application forms in the lead manager concept is much higher than in the retail agency system. Savings in
advertisement and publicity expenses is also affected, as the target of communication is restricted to a few
groups of individuals, since the agent will function as a faciliatory, informer and educator. The reduced
cost benefit will ultimately accrue to the investor in the form of higher returns. In such a system, one
achieves brand loyalty through continuous interaction between agents and investors. Building a team of
agents and other distribution networks such as distribution and collecting agents and franchise offers, will
provide the investors the opportunity of having continuous interaction and contact with the mutual fund.
Therefore, retail distribution through the agents is a preferred alternative for distributing mutual fund
products.

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ADVERTISING AND SALES PROMOTION
By their very nature, mutual funds require higher advertisement and sales promotion expenses than any
consumer product offering measurable performance. Different kinds of advertising and sales promotion
exercises are required to serve the needs of different classes of investors. For instance, an aggressive
‘push’ marketing strategy is required for retail markets, where investors are not adequately aware of the
product and do not have specialized skill in financial market, in contrast with ‘pull’ marketing strategies
for the wholesale market.
There are certain issues with reference to advertisement, publicity literature and offer documents, which
deserve attention. Most of the mutual fund advertisements look similar, focusing on schemes features,
returns and incentives. An investor exposed to the increasing number of mutual fund products finds that
all the available brands are rather identical and cannot appreciate any distinction.
The present form of application, brochures and other literature is generally lengthy, cumbersome and at
times complicated leading to higher emphasis on advertisement. One of the limiting factors is the
regulatory framework governing advertisements of mutual fund products. For instance, in the offer
documents, mutual funds are required to the fund objectives in clear terms. Immediately thereafter, the
first risk factor that has to be mentioned is that there is no certainty whether the objectives of the fund will
be achieved or not. Some more relaxation in these may facilitate bringing more novelty in advertisements,
within a broad framework, without luring investors through false promises, and will certainly improve the
situation.
Another hurdle is the statutory disclaimer required to be carried along with every advertisement. Mutual
funds have to provide risk factors.
Under the present mutual fund regulations, a prior approval by SEBI is a must before a mutual fund can
launch its fund. In the regulation itself, a period of one month has been provided. But in a month’s time,
perhaps the situation may so change, that the timing of launch gets affected.
QUALITY OF SERVICE
This industry primarily sells quality of services, given that the performance cannot be promised. It is with
this attribute along with procedural simplicity, that the fund gradually builds its brand and its class of loyal
investors. The qualities of services are broadly categorized as:
 Timely services after the sale of the units; and
 Continuous reporting of investment performance.
Mutual fund managers must give due attention and evaluate their performance on each front. They may
also consider an option of conducting a service audit for controlling and improving the quality of service.

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Tips on buying Mutual Funds
1) Determine your financial objectives and how much money you have to invest: -Make sure
the fund’s objectives coincide with your own. Don’t change your objectives or exceed the
amount set aside for investment unless you have good reason.
2) Always obtain all available information before you invest: -Request the prospectus, the
statement of Additional information and the latest shareholder report from each fund you are
considering.
3) Never invest in periodic payment plans unless you are virtually certain that you will not
have to redeem early: -If you redeem early or do not complete the plan, you have to pay sales
charges of up to 51% of your investment.
4) Be on the alert for incorporation by reference: - You will have “no excuse” for not knowing
this information, if a problem arises. You may be legally presumed to know materials
incorporated by reference in a prospectus or other documents.
5) Always determine all sales charges, fees and expenses before you invest: - Fees can cost
you dearly and charges for reinvestment of dividends and capital gains distributions can
substantially add to your costs. Shops around the many funds offered and compare the various
fees and costs connected with funds that appeal to you.
6) Learn the costs of redemption: - Sometimes investors are surprised to learn that they have to
pay to get out of funds through back-end loads and redemption fees. Find out the redemption
costs before you invest so you won’t be unpleasantly surprised when you redeem your shares.
7) Never treat the risk of investment in a fund lightly: -Weigh the risks of the funds you want
to buy against your ability to tolerate the ups and downs of the market and your investment
goals. Be extra cautious when considering investing in funds with high yield/high risk
portfolios. Junk bond problems, for example, invariably affect the fund’s performance.
8) Don’t be misled by the name of a fund: -Some funds have been given names denoting safely,
stability and low risk, despite the fact the underlying investments in the portfolio are volatile
and highly risky.

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RESEARCH METHODOLOGY
This section of the project emphasizes on the procedure used to accomplish the project.
1) During the internship, I had communicated to different customers and educated them about Mutual
Fund and its brief features. I had also communicated and discussed with Mutual Fund Distributors,
brokers and influencers involved in financial markets. They had guided me and had tried to solve
different queries regarding mutual fund awareness and penetration of Mutual Fund in semi urban
and rural areas of West Bengal.
2) Addressing people virtually in this COVID-19 pandemic lockdown, specially working
professionals and relatives has not been very easy always as most of the people are focused on
corona virus pandemic and striving for their survival and majority of them found difficult to learn
and convince on the investment concepts in Mutual Fund at present scenario.
3) I tried to convey about the basic foundation on Mutual Fund and its awareness. Unlike insurance,
people are now being aware about the concept of Mutual fund through Television advertisements,
social media ad campaigns and creation of Mutual Fund groups in Facebook and other social
networking sites.
4) I had a detailed discussion with different mutual fund broking firms and agents involved in
mutual fund industry and asked them about the different new strategies to be carried out which
might enhance the customer engagement towards the Mutual Fund Industry (both pre and post
COVID scenario).
RESEARCH DESIGN
For obtaining complete and accurate information, basic research is chosen. Basic research includes
surveys through questionnaires to the walk-in customers of the broking firms (while I was discussing
about the strategies to be carried out and the customer engagement and involvement towards Mutual Fund
Industry), and by other modes of communications like telephonic conversation and social media chats
with those provided customers by the broking firms. The main goal of this type of research is to literate
and aware people both manually and digitally about the facilities available to invest in Mutual Fund while
investing as well as other technical facilities in this COVID-19 pandemic situation.

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RESEARCH INSTRUMENT
The research instrument used in the study is Questionnaire, Observation and Personal telephonic interview
method. The questionnaire consists of customer satisfaction and awareness questions.
UNIT OF ANALYSIS
The respondent of this research were the investors of Mutual Fund invested in different AMCs and Equity
shares.
DATA COLLECTION
PRIMARY DATA: - The research data was collected through.
Questionnaire was being distributed to various investors of Mutual Fund involved in regular investing
through broking firms and agents, brokers in semi urban and rural areas of West Bengal and agents
involved in insurance and Mutual Fund. The questionnaires were circulated via social media like
WhatsApp, Facebook, E-mails. For this project, I had collected such primary data by conducting a
personal telephonic interview through a structured questionnaire, and through observation method. For a
period of Two months, total of 50 respondents were studied and considered for the purpose of analysis.
SECONDARY DATA: - Collection through the internet taking reference from various legitimate
websites and articles.
SAMPLE SIZE
The sample size of the study is limited to 50 individual respondents.
SAMPLING PROCEDURE
The sampling procedure used in this study is Random Sampling.
A simple random sampling is a subset of individuals chosen from a larger set. Each individual is chosen
randomly and entirely by chance, such that each individual has the same probability of being chosen at
any stage during the sampling process.

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A BRIEF SUMMARY OF THE SURVEY
Age groups
Location

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Occupation
Option route preferred while investing in a mutual fund

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Advantages found while investing in Mutual Funds
Rate your level of awareness

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What do you look before investing in a particular mutual fund scheme?
Percentage of your savings have you invested in mutual fund product

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Which route of investment have you chosen for investing in a Mutual Fund Scheme?
Nature of your Mutual Fund Investment

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In mutual funds than in which category would you had chosen for an investment in Mutual Fund?
Before you invest in a mutual fund scheme which risk level would you consider

65 | P a g e
What is your investment time horizon before investing in any mutual fund?
What is the frequency of your investment in mutual fund scheme?

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What is the goal to be achieve behind investing in a Mutual fund?
Which sector(s) would you like to invest or has invested earlier in a mutual fund Scheme?

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Before investing in a mutual fund scheme have you decided any return expectations
Do you examine your portfolio of mutual funds’ investments?

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Please rate whether the past record of the organization influenced your choice of Public sector/
Private sector mutual funds
Please indicate/rate whether growth prospects as a factor influenced your investments in mutual
funds

69 | P a g e
Where do you gather information about the performance of different mutual fund schemes?
Are there sufficient Mutual Fund investor education and service centers in your location/area

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What is the level of investment awareness towards in your area?
Do company personnel/ mutual fund advisors/financial planners influence mutual fund and its
details in your locality/area

71 | P a g e
How frequent is mutual awareness programs are organized/ conducted in your area by
banks/advisory agents/mutual fund firms
Investors in T-15 cities are significantly better informed than investors in B-15 cities

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FINDINGS
 The purpose of the study was to understand the customer awareness about Mutual Fund in Tier-1
and Tier-2 cities and the penetration of Mutual Fund in tier-2 and B-15 cities.
 Low levels of customer awareness are the biggest challenge in channelizing household’s savings
into mutual funds. A majority of investors in Tier 2 cities as well as metros lack understanding of
mutual fund products and can draw little distinction in their approach to investing in mutual funds.
As a result, they are generally unwilling to undertake even minimal risk.
 Investors require a significant distribution capability. In fact, the investors residing in Tier 2 & 3
towns, though aware and willing are unable to invest in mutual funds due to limited access to
suitable distribution channels and investor servicing.
 Commissions offered to mutual fund agents appear to be significantly less attractive than those for
other financial products (particularly insurance). Mutual fund agents outside T-15 cities cannot
rely exclusively on the sale of mutual funds as an income source.
 The findings of the study indicate that as far as factors responsible for investing in mutual funds is
concerned, return potential has got first rank, flexibility has got second rank, liquidity,
transparency and affordability have been ranked third, fourth and fifth respectively.
 Most of the investors belong to the salaried profile followed by businessmen and others
professionals.
 Only 34% investors took help of brokers & financial advisors respectively and the rest, the
investors invest in mutual funds as per the suggestions and information received from friends and
relatives and internet.
 Factors preferred the most while taking investment decisions and age of the investors are
independent of each other and the knowledge about mutual fund and the qualification of the
investors are dependent of each other.
 Majority of the investors have moderate risk capacity while those falling into the low risk category
fall close second.
 People prefer open-end schemes (64%) to close-end schemes because they can be bought and sold
at NAV. It is possible to acquire capital gains by selling at higher NAV and buying at lower NAV.
 Most investors appear to be naïve, with a little knowledge of the investment strategies or financial
details of their investments.

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FUTURE OUTLOOK
 The low penetration level of domestic AMCs and limited share of mutual funds in the households’
financial savings point towards the future potential of the Mutual fund industry in India. Further,
given the rise in income levels and households’ financial savings, an increasing number of
households are expected to invest in mutual fund products that yield higher returns with reasonable
risk.
 The continuous process of urbanization, enhanced financial literacy and a huge young population
with an increased risk appetite are also likely to be instrumental in the long term growth of the
retail segment of the Mutual fund industry. Further, the public sector network of nationalized banks
and post offices are likely to increase their focus on the distribution of mutual funds in Tier 2 and
Tier 3 towns. This will enhance the reach of mutual funds to the rural population.
 Profitability margins of the Mutual fund industry in India is expected to witness a gradual decline
as AMCs’ focus on low margin products to attract risk-averse investors will affect revenue
generation. At the same time, AMCs’ focus on increasing their penetration in rural population
beyond Tier 2 cities will lead to increase in operating costs.
 In case of institutional segment of mutual fund, rising corporate earnings, maturing capital markets
and increased demand for sophisticated treasury management products are expected to play a key
role in accelerating the growth of the Indian Mutual fund industry.
 Furthermore, with the entry of global players, competition for the domestic mutual funds is
expected to increase. In view of the intense competition and shrinking margins, the industry is
likely to witness some consolidation as AMCs will review business strategy and explore
exit/mergers in case of no significant competitive advantage.
 Asset Management Companies are expected to introduce a new range of offerings in the market in
order to attract investments. The new age investor today looks for returns higher than the traditional
bank deposits. Fund houses focus on designing products which suit investor requirements of a
higher return and with better diversification of risk.
 It is an unspoken responsibility of the Asset Management Companies to spread financial literacy
among investors, which will inevitably lead to increased penetration of their products. Awareness
campaigns and education drives will be more regularly undertaken.
 Disclosure requirements are expected to be held consistently across all asset management
companies in order to institutionalize greater transparency in the system. Information will be
readily available and communicated effectively to investors, for them to take informed decisions.
 Optimum operating efficiencies are expected to exist in Asset Management Companies, and for
this, cost containment measures will be undertaken by them. Outsourcing could be looked upon as
a possible measure to reduce costs, provided the risks emanating from this are better managed.

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CONCLUSION
 The MF industry has grown exponentially over the last decade. However, opportunities for
further growth exist. The demonetization exercise has disrupted the economy in general and
the financial sector in particular. Digital payments have been further encouraged on the back
of promoting a cashless economy, one of the key outcomes of demonetization.
 A preliminary enquiry was carried out into the nature of geographical penetration and
distribution of mutual funds in India as well as their likely determinants. Using a questionnaire
survey, we collect qualitative and quantitative evidence from brokers and agents on the nature
and determinants of their geographical presence throughout the country and in rural and semi-
urban areas.
 The study has brought to light the differences in the patterns of investment among various
classes of investors based on demographical differences. The study conducted shows that the
investors are aware of various schemes of mutual funds in Tier-1 cities. Better return & safety
and tax benefit is the main factors of mutual fund that allure the investors.
 Despite the challenges it faces in terms of lack of awareness and low financial literacy, there
is a growing importance of the industry with the increase in the youth population and the
working class of the country.
 The drive to expand reach beyond Tier 1 cities and make mutual fund offerings available to
people in smaller towns and cities has indeed taken up the attention of the industry. The rural
and semi-urban population is now ‘financially included’ indicating that there is potential to
create specific products to suit their needs.
 Share of AUM in households’ gross financial savings need to be improved by making
investors’ aware about mutual funds. However, several components of such an initiative, like
investor awareness, broadening investor participation and product innovation, need to be
aligned in order to fully establish inclusive growth. The industry needs to give due emphasis
on the above factors, drawing out an efficient business and operating model to ensure that the
inherent challenges that the industry is facing is efficiently dealt with.
 Designing a competent and all-pervasive business model has all the more become important in
the current scenario of changing business and regulatory legislations. At a time when
amendments to key regulations are being analyzed in terms of impact on the business of the
industry, it remains to be seen, how the pace and pattern of growth of the industry takes shape.
 In this report, we have treated mutual fund sales as homogenous sales by the independent
financial agents. Analysis of sales strategies of agents would allow future research to be much
more precise in determining the impact of agents on Mutual Fund sales.

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RECOMMENDATIONS
 There are some suggestions for better investing for investors that they should keep their investment
for long time keeping in mind the level of risk involve and saving pattern.
 They should take help of private financial consultants to have investment portfolio so as to reduce risk
in investment.
 They should not invest in high volatile funds.
 They should collect all possible information before investment.
 Periodical review should be done for investment and risk analysis should be done regularly and
properly, maintain proper records for each transaction.
 A careful and reasonable diversification of investment in mutual fund should also be there on
investor’s part to balance the risk involved in investment.
 It is also suggested that investor should have a habit of regular saving to earn some more extra
consistently through changing market scenario since small savings will grow into bigger capital base.
 One of the strong suggestions is that to invest a reasonable part of investment in to liquid security so
that to meet any contingency.

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References
Websites:
 http://www.capitaline.com.imthyderabadlrc.remotexs.in/SiteFrame.aspx?id=1
 www.pwc.com/in
 Yadav, R. A. and Mishra, Biswdeep, ‘Performance Evaluation of Mutual Funds:An Empirical
Analysis’ MDI Management Journal, Volume- 9 (2), July, 1996, pp-117-125
 https://groww.in/blog/advantages-disadvantages-mutual-funds-india/
 https://www.paisabazaar.com/blog/mutual-funds-penetration-in-india
 https://investinganswers.com/dictionary/mutual-fund
 https://www.relakhs.com/rbi-data-indian-households-savings-2018/
 http://www.amfiindia.com/
 http://www.google.co.in/
 http://www.moneycontrol.com/
 http://www.mutualfundsindia.com/
 http://new.valueresearchonline.com/
 http://www.sebi.gov.in/
 http://www.rbi.gov.in/
Books & Journals:
 SEBI – NCAER, Survey of Indian Investors , SEBI, Mumbai, 2000.
 Sadhak, H. “Mutual Funds in India”.
 Batra,G.S. “Growth and Performance of Mutual Funds”
 Panigrahi, M.S. “Mutual Funds: Growth, Performance and Prospects”
 Singh, Jaspal “Mutual Funds: Growth, Performance and Prospects”
 Gopal, Madan, “Mutual Funds in India: The Future is Bright”.
 Abraham Sunita & Shashikant Uma, “Understanding Mutual Funds” PP: - 5 - 55
 Indian Journal of Finance, Vol.7 No. 1, January 2013, ISSN 0973-8711
 Deepak Agrawal , ‘Analytical Study on the Performance of Indian Mutual Funds’Finance India
Volume- XXV, No. 2 ,June 2011, pp-477-488
 Carhart, M.M. (1997) On Persistence in Mutual Fund Performance. Journal of Finance, 52, 57 82
 Indian Journal of Finance, Vol.7 No. 1, January 2013, ISSN 0973-8711
 Singh, Binod Kumar (2012), “A study on investors’ attitude towards mutual funds as an
investment option”, International Journal of Research in Management, ISSN 2249-5908, Issue2,
Vol. 2, pp. 61-70.
 Mehra, G., & Kalia, A. (2013), “Indian Mutual Fund Industry: Unearthing the Growth Potential
in Untapped Markets, Mumbai: Confederation of Indian Industry and PwC”.

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