The Mutual Fund Industry in India
with the formation
of Unit Trust of India (UTI) with at
the initiative of the Government of
India and Reserve Bank of India.
The mutual fund industry in India is
one of the emerging industries
The Association of Mutual Funds in India
(AMFI) is the industry body set up to
facilitate the growth of the Indian mutual
fund industry. It plays a pro-active role in
identifying steps that need to be taken to
protect investors and promote the mutual
What is mutual Fund?
Mutual funds are investment
avenues that pool the money of
several investors to invest in
financial instruments such as stocks,
debentures etc. The appreciation
made on the investments is
distributed among the investors on the basis of the units held
by each of them.
The mutual funds in India are
governed by Association of
Mutual Funds in India, the
umbrella body for mutual
funds, which is in turn
governed by the Securities and
Exchange Board of India
The history of mutual funds in India can be broadly divided
into four distinct phases:First Phase – 1964-87: The first scheme launched by UTI
Second Phase – 1987-1993: Entry of Public Sector Funds
Third Phase – 1993-2003: Entry of Private Sector Funds
Fourth Phase – since February 2003
With the emergence of UTI and
Phases that occurred the Mutual Fund
Industry has entered its current phase of
consolidation and growth. The graph
indicates the growth of assets over the
consecutive phases over the years.
Concept of Mutual Funds
The Mutual Fund is managed by
Professional Investment Managers
who buys and sell securities for
more effective growth of the funds.
As u invest in a mutual fund
company, as a mutual fund
investor u become a “shareholder”
of the mutual fund company. The
savings thus provided are invested
by mutual fund companies in
securities, stock, debentures etc
which in turn generate Profitable returns which are then passed over to the
shareholders and are distributed appropriately.
Types of Mutual Fund Schemes
Open Ended Fund/Scheme: These are funds that you can buy and sell
anytime during the year. It is available for subscription and
repurchase on a continuous basis.
Close Ended Fund/Scheme: These are funds that are open only for a
specific period after which you'd have to buy them from the secondary
market. It has a stipulated maturity period of 5-7 years.
Interval schemes: These schemes combine the features of open ended
and close ended schemes and are available for purchase or sale during
a select period
By Investment Objective:
Growth: These are highly aggressive schemes and invest mainly in
Income: Income funds invest in medium to long-term debt
instruments. These are low risk and aim at a fixed current income .
Balanced: Also called Hybrid funds, these are a combination of
growth, debt and money market funds.
Money market schemes: These schemes invest in short term debt
instruments and are highly liquid.
Tax saving: These are equity linked saving schemes that offer tax
benefits under Section 80 C and have a compulsory lock in period of
Special schemes: These are select funds that aim at replicating the
performance of an index. Also there are funds that invest in specific
sectors that fall under this
Comparison between FD, Bonds and Mutual Fund – Features
Best Mutual Fund
anklin India Bluechip | DSP BR Equity | HDFC Prudence | HDFC Top 200 | ICICI Pru Dynamic
FRANKLIN INDIA BLUECHIP
Franklin India Bluechip is a time tested fund Launched in
1993. Making the best of increasing liquidity in Indian markets,
The Funds too have simply grown with market at a much faster
Rs 5040 Crore as of
We choose Franklin India Bluechip for his ability to contain
Declines Despite staying predominantly invested in equities.
The fund spotted value in private banking stocks in late 2008
when these stocks were beaten down. Similarly it took the bold call of
holding a good chunk in capital goods stocks in 2010, when the rest
of the market did not see much in this segment. And these contrarian
calls worked well, thanks to the fund’s eye for value.
Franklin Bluechip is a good option for
those just beginning to test waters
inequities. it is this portfolio approach
that has helped build handsome wealth over the
IF YOU THOUGHT a fund that diversified its portfolio
too much and churned its stocks too many times will do
no good, DSP BlackRock Equity will catch you wrong!
This multi-cap fund, with a changing mix of large and
mid-cap stocks has stood its ground quite well since its
launch in April 1997.
Rs 2616 Crore as of
The fund’s ability to constantly switch between growth and value styles
in line with the market conditions, has made it an adept market reader.
In the last one year,the fund churned its portfolio twice over.
That simply means that it exits large-caps once it derives value from them.
DSP BR Equity is a good fit in a buy and hold
portfolio meant for the long term. The fund may be
adept but it does slip sometimes with a defensive
portfolio, it was caught unaware when the market
took off northward in March 2009 after the bear
onslaught. This fund can surprise you with short
spurts of outperformance and sometimes slipups
too. But if you let it be, it can generate wealth comfortably.
A Fine Balancing Act
IF A FUND CAN HOLD a fourth less of equity
than regular diversified equity funds and still beat
the latter’s average, it has to be HDFC Prudence.
With a return of 19 per cent since its launch in
Rs 6239 Crore as of
HDFC Prudence does balance its portfolio well. But for a
Balanced fund, its approach is quite aggressive
Its buy and hold approach hence mitigates risks associated
with interest rate movements.
That HDFC Prudence is managed by the same fund manager since its
inception, when it was launched by Zurich Mutual, has also provided stability
in terms of fund management.
years years Inception
HDFC Prudence is a good candidate
for those wanting to contain downside
risks but looking for superior returns in an equity rally. Its sister fund HDFC
Balanced is a little more conservative, often holding a tad less in equities than
ICICI Pru Dynamic
An Aggressive Defender
IF YOU THINK of a fund that would defend your
Portfolio aggressively but stay comfortably ahead of
Its benchmark S&P nifty, it has to be
ICICI Prudential Dynamic. You may have a tinge
of surprise that this reclusive scheme even made it to
our list of fabulous funds.
Rs 3691 Crore as
of Dec 2012
Cash calls together with aggressive churning is this fund’s trump card. now, a
cash call works well in a down market. But Sankaran naren, the fund manager,
has used this in a bull run as well. In markets such as 2005 and 2006, the fund
outperformed its benchmark by 20-25 percentage points and in fact beat some
of the peers in FundsIndia Five as well.
years years Inception
A fund like ICICI Pru Dynamic would fit
only a long-term investor’s portfolio. Its steep
exit load can punish you for early exit. Besides
quickly normalising your portfolio post phases
of market dips, it also generates steady returns. But you
will see the fund underperform, it moves to cash even as peers stay fully invested in
HDFC TOP 200
Top of League
LAUNCHED in September 1996, large-cap focused
Fund HDFC Top 200 can easily be termed as one of
The most consistent performers in the equity fund
Rs 12,122 Crore as of
“Risk control is as important to wealth creation as is Rs 5000
generating returns. An investor who generates moderate
returns fairly consistently with limited downside risk is likely to do better when
compared with another investor who sometimes achieves spectacular returns but
makes occasional considerable losses.” Prashant Jain, he remained true to the above
statement in his managing HDFC Top 200. The fund, along with HDFC Equity,
enjoys among the lowest expense ratios in the active fund category, thanks to
massive asset size.
years years Inception
HDFC Top 200 is suitable for any investor’s
core portfolio. Its forgettable performance in 2011,
though, has led to doubts in many an investor’s
mind. Like few other HDFC funds, being fully
S&P Nifty -0.5 20.1 12.9
invested in the market, besides holding highest
exposure to stocks such as SBI, which underperformed,
was the primary reason for the slip up. But the fund quietly accumulated SBI in
2011 when the stock under-performed. The stock is now up 46 per cent from its year
ago price perhaps adding to your wealth as well, through HDFC Top 200.
Diversification - Mutual Funds aim to reduce the
volatility of returns through diversification by
investing in a number of companies across a broad
section of industries and sectors.
Liquidity - This mean that investors can sell their
holdings in Mutual Fund investments anytime without
worrying about finding a buyer at the right price.
Tax efficiency - Mutual Fund offers a variety of tax benefits. Please visit the tax
corner section or consult your tax advisor for details.
Low transaction costs - Since Mutual Funds are a pool of money of many investors,
the amount of investment made in securities is large. This therefore results in paying
lower brokerage due to economies of scale.
Transparency - Prices of Mutual Funds are declared daily. Regular updates on the
value of your investment are available. The portfolio is also disclosed regularly with
the fund manager's investment strategy and outlook
Well-regulated industry - All the Mutual Funds are registered with SEBI and they
function under strict regulations designed to protect the interests of investors.
Convenience of small investments - Under normal circumstances, an individual
investor would not be able to diversify his investments a Mutual Fund on the other
hand allows even individual investors to hold a diversified array of securities due to
the fact that it invests in a portfolio of stocks.
At times the prices or yields of all
the securities in a particular market
rise or fall due to broad outside
Sometimes referred to as "loss
of purchasing power."
In short, how stable is the company or entity to which you lend your money
when you invest? How certain are you that it will be able to pay the interest
you are promised, or repay your principal when the investment matures?
•Interest Rate Risk
Changing interest rates affect both equities and bonds in many ways.
Investors are reminded that "predicting" which way rates will go is rarely
successful. A diversified portfolio can help in offsetting these changes.
A number of companies generate revenues. Changes in exchange rates may,
therefore, have a positive or negative impact on companies which in turn
would have an effect on the investment of the fund.
The sectoral fund schemes, investments will be predominantly in equities of select
companies in the particular sector s such companies and may be more volatile
than a more diversified portfolio of equities.
•Changes in Government Policy
Changes in Government policy especially in regard to the tax
benefits may impact the business prospects of the companies leading to
an impact on the investments made by the fund.
Mutual Funds in
ABN AMRO Mutual Fund
Benchmark Mutual Fund
Birla Sun Life Mutual Fund
Bharti AXA Mutual Fund
BOB Mutual Fund
CanaraRobero Mutual Fund
DBS Chola Mutual Fund
Deutsche Mutual Fund
DSP BlackRock Mutual Fund
Escorts Mutual Fund
Fidelity Mutual Fund
Fortis (ABN ) Mutual Fund
Franklin Templeton Mutual
HDFC Mutual Fund
HSBC Mutual Fund
ING Vysya Mutual Fund
JM Financial Mutual Fund
Kotak Mahindra Mutual Fund
LIC Mutual Fund
ICICI Prudential Mutual Fund
Reliance Mutual Fund
Sahara Mutual Fund
SBI Mutual Fund
Standard Chartered Mutual Fund
Sundaram Mutual Fund
Taurus Mutual Fund
UTI Mutual Fund
Current Scenario of Mutual Fund
Mutual Fund industry in India is in a very prominant
Still growing, still evolving. There have been various
initiatives on various fronts and now the industry
has reached close to Rs 8 lakh crore. But if compared
with the size of mutual fund
industries of most developed countries such as
China and Australia, we are much smaller in size.
When the Prime Minister took over the Finance
Ministry from Pranab Mukherjee on his election as
the President of the country, one of the first points the PM raised was that the
mutual fund industry needs to be re-energised. Before this there had been various
discussions which culminated into a circular issued by the Securities and Exchange
Board of India on September 13, 2012.
At present, we have close to 50,000 distributors registered
with AMFI. We also expect that the smaller towns will
contribute more in the new cadre of distributors. The
market sentiments have improved. In a long-term
perspective, there is no doubt about growth of Indian
economy. In such a scenario, an important initiative that
will do well for the development of the industry will be
penetration by more feet on Street. With the introduction
of the new type and the announcement of free registration will support in achieving
this objective of more feet on street to sell mutual fund.
There is need to build awareness of
the new funds among the investors with
Constantly being in contact with them.
Some of investors have asked for periodical market
report about stock market so that they can get the
Companies must try to locate hard working
distributors who are providing good business in
their respective geographical area.
I nv est ors are nev er going to accept th e
entry load . So s uch t yp e of activ ity should
Be avoided as much as possible.
The company should advertise their tax
saving plan more so that
t h e y c a n g a i n m o r e customers.
The mutual fund investors prefer more
of the equity fund as they want more return
on their money. Usually people preferred
to invest in mutual fund seeing
the performance of mutual fund scheme.
Sometimes due to lack of detailed
awareness about mutual fund schemes the
investors seek advice of distributors.
Investors feel that the AMC should go for
more promotional activities & should try to come up with new
innovative schemes which can easily be understood by the investors.
Even after seeing the market crash in May 2006 people still thinks
that mutual fund is much reliable way to invest in stock market. So
investors are not going for redemption during crash& were ready to
wait. In fact during the crash time many people were ready
to invest in mutual fund.
So that’s a positive sign and the mutual fund sector may turn out to be its
best in the