Mutual fund reseach paper

Mutual fund reseach paper

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  Research Paper On ‘StudyingContribution of Mutual Fund in Indian Economy for Sustainable Development’  Abstract: Industry is the production of goods or services within an economy. The major source of revenue of a group or company is the indicator of its relevant industry. Large group of industries has multiple sources of revenue generation. A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. While there is no legal definition of the term "mutual fund", it is most commonly applied only to those collective investment vehicles that are regulated and sold to the general public. They are sometimes referred to as "investment companies" or "registered investment companies". Hedge funds are not mutual funds, primarily because they cannot be sold to the general public. The first introduction of a mutual fund in India occurred in 1963, when the Government of India launched Unit trust of India (UTI). Until 1987, UTI enjoyed a monopoly in the Indian mutual fund market. Then a host of other government-controlled Indian financial companies came up with their own funds. These included State Bank of India, Canada Bank, and Punjab National Bank. This market was made open to private players in 1993, as a result of the historic constitutional amendments brought forward by the then Congress-led government under the existing regime of Liberalization, Privatization and Globalization (LPG). The first private sector fund to operate in India was Kothari Pioneer, which later merged with Franklin Templeton. In 1996, SEBI, the regulator of mutual funds in India, formulated the Mutual Fund Regulation which is a comprehensive regulatory framework. Mutual fund is also helps to develop finance sector as well as it provide long term investment to economy. Many of the country having the ability to develop but because of unavailability of fund they become backward or undeveloped. For developing those underdeveloped countries mutual fund is play vital role. There for this research is happen.
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  The landscape ofthe financial sector in India is continuously evolving, accredited to regulatory changes being undertaken, which is leading market participant like the asset management companies (AMCs) and distributors to restructure their strategies and adopt business models which will yield sustainable benefits. Some of the other trends which have emerged strongly over the past year are heavy outflows triggered by market volatility and partnering of asset management companies with banks, to increase the strength of distribution networks. The whole paper is divided into five sections. In the first part, we have discussed the conceptual framework of mutual fund. In the next section, we have focused on the growth of mutual fund industry in India. In the third section, we have analyzed the trends in the mutual fund industry. Then, we have discussed the challenges of mutual fund industry and finally, the way ahead for mutual fund industry in India. Keywords:  Mutual Funds,  Growth,  Challenges,  Business models,  Regulatory  Introduction of Topic:-
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  Mutual Fund isan investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus. One of the main advantages of mutual funds is that they give small investors access to professionally managed, diversified portfolios of equities, bonds and other securities, which would be quite difficult (if not impossible) to create with a small amount of capital. Each shareholder participates proportionally in the gain or loss of the fund. Mutual fund units, or shares, are issued and can typically be purchased or redeemed as needed at the fund's current net asset value (NAV) per share, which is sometimes expressed as NAVPS. Mutual funds as an intermediation mechanism and products play an important role in India’s financial sector development. Apart from pooling resources from small investors, they also provide informed decision making mechanism to them. Thus they contribute to not only financial sector participation, but also financial inclusion and thereby enhance market efficiency. Additionally they contribute to financial stability and help in enhancing market transparency.  Objective Of Study:- 1. To study growth of mutual fund industry 2. To study Employment generated by mutual fund industry 3. To study Mutual fund industries contribution to GDP 4. Contribution of Indian mutual fund industries to FDI. 5. Trends in mutual fund industry 6. Funds mobilized under mutual funds during period 2010-14 7. . The way forward 8. Challenges for mutual fund industry
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   Literature review Thereis lot of research is already done on mutual fund and Indian mutual fund industries but it is essential that to find something new and solve current problem by previous theory. There for there is need to new research and make our knowledge up to date. Here also Indian economy faces new problem related with fund. There for to change according changes this research take place. Here some previous researches take as references these are follows: Mr. Sanjay Trivedi has collects varies types of information which is found very useful to this project the gives detailed information about varies types schemes which company or finance sector uses for rise new fund. They are as follows; Open Ended Scheme, Close Ended Scheme, Interval Scheme (Equity Fund, Debt Fund, and Income Fund), Liquid Fund, Balanced Fund And So On.  Researchmethodology The research paper is an attempt of exploratory research, based on the secondary data sourced from journals, Internet, articles, previous research paper. Looking into requirements of the objectives of the study the research design employed for the study is of descriptive type. Keeping in view of the set objectives, this research design was adopted to have greater accuracy and in depth analysis of the research study. Available secondary data was extensively used for the study. The investigator procures the required data through secondary survey  Data analysis and interpretation  Growth of Mutual Fund Industry The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank. Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development
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  Bank of India(IDBI) took over the regulatory and administrative control place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 cores of assets under management. The year 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores. With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993.The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds. Indian mutual fund industry has grown at a Compounded Annual Growth Rate (CAGR) of 15 per cent from FY07 to FY13, the growth performance in the recent years have been rather subdued. However, Assets under Management (AUM) as a per cent of GDP for India is about 5 to 6 per cent, significantly lower than some other emerging economies.
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   Employment Generatedby mutual Fund Industry In the last decade, self employment opportunities generated by the direct selling industry in India has more than doubled to 96.3 million people in 2013, from 43.8 million in 2001, according to a latest survey. With over 14 years of activity in India, direct selling industry has touched a size of about Rs 7,472 crore in FY14. According to a release by the Indian Direct Selling Association (IDSA), “The sector offered self employment opportunities to 43.8 million direct sellers in 2001, which is now, in 2013, stood at 96.3 million.” Nearly 43 per cent of market share of global direct selling industry is held by Asia-Pacific markets in 2013 at $ 77,569 million recording a growth rate of 12.6 per cent. Rajat Benerji, chairman, IDSA says, “Direct selling is a potential avenue; not only has it helped people to be independent financially but also inculcates self confidence. The direct selling model helps the independent sales force to earn compensation from their sales of goods and services directly to consumers thereby exposing the vast opportunity to build one's own independent business.”  Mutual fund industries contribution to GDP From a single-player monopoly in 1964, the Indian mutual fund industry has evolved into a high- growth and competitive market on the back of favorable economic and demographic factors mutual fund industry has grown at a Compounded Annual Growth Rate CAGR) of 15 per cent from FY07 to FY13, the growth performance in the recent years have been rather subdued. However, Assets under Management (AUM) as a per cent of GDP for India is about 5 to 6 per cent, significantly lower than some other emerging economies, for example, 40 percent for Brazil and around 33 per cent for South Africa. This indicates significant headroom for growth. However, the industry growth will continue to be characterized by external factors such as volatility and performance of the capital markets, and macro-economic drivers such as GDP growth, inflation and interest rates. The Indian mutual fund industry has shown relatively slow growth in the period FY 10-13 growing at a CAGR of approximately 3.2 per cent. Average (AUM) stood at INR 8,140 billion as of September 2013. However, AUM increased to INR 8,800 billion as of December 2013.Lackluster stock market performance, rising inflation and anticipation of a rise in interest rates has led to a tapering of growth in the Indian mutual fund industry in the recent years. In comparison to global markets, India’s AUM penetration as a per cent of GDP is between 5-6 per cent while it is around 77 per cent for the U.S., 40 per cent for Brazil and 31 per cent for South Africa. Despite the relatively low penetration of mutual funds in
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  India, the marketis highly concentrated. Though, there are44 AMCs operating in the sector, approximately 80 per cent of the AUM is concentrated with 8 of the leading players in the market. There have been recent instances of consolidation in the market and market concentration is expected to remain in the near-term.  Contribution of Indian mutual fund industries to FDI. International mutual funds or overseas funds are portfolio of equities, bonds, and money market securities traded in foreign market. Recently these funds have gained popularity because of the diversification they offer. They offer many benefits such as taking advantage of emerging markets, commodities boom, or business cycle of different markets. Just like domestic funds, international mutual funds offer many varieties such as commodity based fund, thematic fund, country based, sector based, and others. Moreover, these funds are managed by experts in international markets. Many fund houses have international mutual funds in their portfolio. Indian mutual fund industry offers many choices as far as international mutual funds are concerned. Almost all the fund houses such as Birla sun life, HSBC, DSP black rock, Fidelity, Tata, ICICI Prudential offer international mutual funds. Invest wisely and take advantage of the diversification.
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  Trends in MutualFund Industry A. Number of Schemes under Mutual Funds TABLE1 NUMBER OF SCHEMES UNDER MUTUAL FUNDS DURING THE PERIOD 2010- 2014 Year Debt Income Total 2010-11 679 376 1131 2011-12 872 352 1309 2012-13 857 347 1294 2013-14 1178 363 1638 0 200 400 600 800 1000 1200 1400 1600 1800 2010-11 2011-12 2012-13 2013-14 Debt Income Total
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  B. FUNDS MOBILIZEDUNDER MUTUAL FUNDS DURING PERIOD 2010-14 Year Income 2010-11 66592.30 2011-12 50618.80 2012-13 43364.31 2013-14 46092.99 0 10000 20000 30000 40000 50000 60000 70000 2010-11 2011-12 2012-13 2013-14 income
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  C. Challenges forMutual Fund Industry 1) Lack of Financial Education and Awareness: Financial literacy is the one of the most fundamental factor impeding the growth of penetration of any financial product in the smaller cities and towns. Investors need to be made aware of their financial goals and the means to achieve the same. SEBI is making efforts for the investor awareness campaign. 2) Limited Distribution Network: The second critical issue for fund houses to distribute their products in smaller cities is the availability of quality distribution infrastructure. Fund houses need infrastructure like branched, adequate number of relationship managers and sales service staff in these locations to be able to increase their sales volume coming from these geographies. 3) Distribution cost: Cost of establishing A Distribution network in B-15 cities is quite high. It is the cost per transaction or the low sales volume that makes the pursuit economically unviable or atleast challenging 4) Cultural Bias: Cultural Bias towards physical assets, as of FY13, 46 percent of total individual wealth in India is invested in physical assets. Although, in the past few decades, the investors have increasingly relied on financial assets to invest their savings, the contribution of MFs in the asset portfolio is vey low. D. The way forward The Mutual fund industry needs to have an „outside-in‟ perspective as compared to „inside-out‟ perspective. Understanding investors‟ needs should be followed by a product channel alignment. Increasing financial literacy will be the key to unlock the doors to B-15 and also to remove the perception that equates mutual fund to only equity. Investor awareness campaigns should be conducted to increase the AUM in smaller cities which would help industry to progress in a holistic manner. Knowledge about mutual fund industry should be included in educational curriculum. Fund houses may need to find and partner with the right distributor to make the
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  products available toinvestors in smaller cities. Therefore, Banks and IFAs could play a pivotal role in reaching the investor base. Also, distributors should be incentivized enough to ensure that they project mutual funds as a long-term investment for fulfilling financial goals. For future growth, tax could act as an enabler as tax benefits can be a pull factor for investors. For example, fund of funds does not get the required tax benefit from the government. May be, government could look at such funds and few offshore funds from India for tax benefits. Technology can act as a key enabler and help the fund houses reach investors at a low cost and more efficient manner. AMCs need to make the relevant investments in technology to help reach investors to help ensure transactions on the channels of their choice.  Findings 1. mutual fund industry plays important role for providing new fund to large scale industries 2. Mutual fund generates Employment in finance sector. 3. If Mutual fund manages properly it provides boost to GDP.  Suggestion 1. Investor awareness is the prerequisite for achieving transformational growth of mutual funds. This requires planning, financing and executing initiatives aimed at increasing financial literacy and enhancing investor education across the entire Country through collaborative efforts of SEBI, AMFI, AMCs, Confederation of Indian Industry (CIl), Ministry of Finance and the media 2. The market success of any product, particularly a financial product, depends largely on its acceptance by consumers, in this case investors 3. AMCs should focus on giving training to distributors of mutual funds to 4. Enhance their marketing and advisory capabilities so that they can win the trust and Confidence of customers. 5. The eligibility norms for setting up mutual fund houses should be looked into to allow only serious players to enter/remain in the market 6. Fund houses need to assign an increased Budget for investment in technology, which will help them streamline their distribution.  Conclusion The road ahead for the mutual fund industry will be paved by the performance of the capital markets. But, more importantly, it remains to be seen, how fund houses adapt themselves to changes in regulations, Thereby shaping growth for the future. A continuously evolving regulatory framework makes it mandatory for the industry to elicit a clear growth path, making it easier to assess obstacles and tide over them with time
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  References 1) Annual Report,2011-12, SEBI 2) “Indian Mutual Fund Industry-Towards 2015”, CII, 6th Mutual Fund Summit, 2012 3) “Indian Mutual Fund Industry, Distribution Continnum: Key to Success”, KPMG 4) Moneycontrol.co.in 5) Amfi.com 6) Sebi.annualreport/mutualfund.com 7) Mutualfundindia.com 8) Investorworlds.com