A Study on the Growth of Mutual Funds in

India

A Study on the Growth of Mutual Funds in India

Department of Management, Medicaps University, Indore M.P

INTRODUCTION

Recent Trends in Mutual Funds in India

Encouraging stock market performance, inflation rate and attractive interest rates has led
to a rise in the growth in the Indian mutual fund industry in the recent years. In the year
2014, change in government and rise in expectations of people leads to sudden growth in
capital market. A parallel growth was also observed in the Indian mutual fund industry.
Over the last 5 years, the Assets Under Management (AUM) of Indian mutual fund
industry grew from 67093099 lakhs in FY 2012 to 182958449 lakhs in FY 2019 showing a
compound annual growth rate (CAGR) of22.21%. Further, the AUM of the Indian mutual
fund industry witnessed an exceptional growth of 35.17% in FY2017. According to
Association of Mutual Funds in India (AMFI) data, AUM grew from Rs.13.53 lakh crore in
March 2016 to Rs. 18.29 lakh crore in March 2019. Market Share of Asset Management
Companies
AUM penetration of the Indian mutual fund industry as a per cent of GDP is only Approx. 6
percent (Paul, 2014). Despite the relatively low penetration of mutual funds in India, the
market is highly concentrated. Though, there are 44 AMCs currently operating in the
sector, the AUM of the industry is concentrated with five leading fund houses. Approx. 57
per cent of the total AUM is shared by, ICICI, HDFC, Reliance, Birla Sun Life and SBI Mutual
Fund.

LITERATURE REVIEW

Many scholars have made studies on investors’ behaviour, and many studies are going
on. Also many researches on the performance of mutual fund schemes had been
conducted. From the available studies from secondary sources the literature is reviewed
here to have better clarity of investors’ behaviour and the study. Thereafter the
empirical studies done on the similar areas of research in international context as well as
in Indian context were highlighted. The purpose of literature survey in any study is to help
the researcher, to find out the gap between the research that has already been conducted
and the theoretical linkage of the research.

Deepak Agrawal (2011) in his research found that since the development of the Indian
Capital Market and regulations of the economy in 1992 there have been structural
changes in both primary and secondary markets. Mutual funds are primary contributors to
the globalization of financial markets and one of the main sources of
capital flows to emerging economies. He has analysed the Indian Mutual Fund Industry
pricing mechanism with empirical studies on its valuation and also analyse data at both
the fund-manager and fund-investor levels. His study revealed that the performance is
affected by the saving and investment habits of the people and the second
side the confidence and loyalty of the fund Manager and rewards affects the performance
of the MF industry in India.
Prajapati, K. P., & Patel, M. K. (2012) in their research evaluated the performance of
Indian mutual funds which is carried out through relative performance index, risk-return
analysis, Treynor's ratio, Sharp's ratio, Sharp's measure, Jensen's measure, and Fama's
measure. The data for analysis used is daily closing NAVs. The study
period was 1stJanuary 2007 to 31st December, 2011. The results of performance
measures concluded that most of the mutual funds have given positive return during
2007 to 2011.
of 28 equity diversified Indian fund schemes for the period from January 2007 to June
2011. The selected equity diversified fund schemes show mixed performance. He found
that about 60% of the fund schemes were able to beat the benchmark markets. Better
performing fund schemes were exposed to higher risk but were less afflicted
to market risks. All the schemes under study were relatively exposed to less risk than the
market, however with high degree of volatility. A majority of the funds were reasonably
diversified and reduced the unique risk. Consequently, unique risks and the returns were
negatively associated. The study also exposes that about 58% of fund schemes were
capable of beating the market by stock selection skills. He recommends that, as far as
market timing is concerned, the fund managers almost failed both to book the profits in
the up market and accumulate the stock in the down market.

RATIONALE OF THE STUDY:

India is one among the top 7 world’s largest economy and India’s savings rate is very high
in comparison to other countries. In order to accelerate economic development of our
country, it is not only necessary to increase the rate of savings but also to improve the
holding pattern of such savings. As investment directly in the equity shares is too risky,
mutual funds have become route in mobilization and allocation of resources. The mutual
fund industry has registered a healthy growth in the past few years. But still there is lot
scope as the rate of conversion of household savings into mutual fund investment in our
country is very low. And the awareness about Mutual
Funds, its different schemes and its benefits may boost the investment in MF schemes
With this emergence of many companies offering various schemes an average investor is
unable to take a decision regarding selection of scheme. This critical study would help
potential investors for making investment decisions, as well as it will be helpful to
researchers for further detailed study.Many studies have been undertaken on the
performance of mutual fund schemes. However, particular study in the schemes that are
selected here is insufficient. Thus, there is a need for the present study to bring to light the
performance of these selected schemes of mutual funds, which can help the retail
investors to make valued judgment and support in selecting category of schemes on the
basis of performance. This study will also help the society at large, government,
academicians, and managers of asset management companies as well.

OBJECTIVE OF THE STUDY

1. To analyse the performance of the selected mutual fund equity schemes on risk and
return basis.

CONCLUSION

This study concludes that Mutual funds are among the most preferred investment
instruments among the respondents. For middle income individuals, investing in mutual
funds yields higher interest and comes with good principal amount at the end of the
maturity period of the mutual fund investment. According to intermediaries important fact
is revealed that mutual funds are safe, with close to zero risk, offering an optimized return
on earnings and protecting the interest of investors. It is important to gain good
understanding of mutual fund investments, companies in the field, and mutual fund
experts, as customers are easily misguided by the advertisements and offers promoted
by various financial institutions. A large number of investor switches from fund to gain
more from changing market situations. on the other hand 64% investor prefer to invest in
existing mutual fund as they analyse schemes looking at its past performance and they
feels that investment in newly launch funds or schemes may involves high risk and at the
same time they bear high expenses which may reduce their returns.Mutual fund
companies should come forward with full support for the investors in terms of advisory
services, participation of investor in portfolio design, ensure full disclosure of related
information to investor. Proper consultancy should be given by mutual fund companies to
the investors in understanding terms and conditions of different mutual fund schemes.
Such type of fund designing should be promoted that will ensure to satisfy needs of
investors, mutual fund information should be published in investor friendly language and
style, proper system to educate investors should be developed by mutual fund companies
to analyse risk in investments made by them, etc. On the other it is required from
government and regulatory bodies point of view that more laws should be there to secure
the funds of investors to be exploited, more tax rebate should be given on mutual fund
investment, proper and effective grievance system, right of investor education, and more
control on asset management companies should be there.

SUGGESTIONS

This study has given some suggestions for creating awareness about the mutual fund
investment and schemes so that mutual fund investors may get information that helps
out in their investment decision. Intermediaries providing consultancy, they would
understand the need of investors and suggest plan accordingly. These are as follows:

1. Most of the investors are not aware of dealing in Mutual Fund. Investors interested to
invest in MF
schemes should be given some basic knowledge about operations of Funds. Investors
should also be aware to frame their investment objectives and know how to diversify the
risk in their portfolios.

2. Government and Mutual Fund organizations should also take some initiative to
motivate women investors by educating them and providing extra benefits to them in all
types of investments.

3. It is also suggested the AMC’s should come up with some focused investment
solutions for focused group of investors. Where they canmanage investments taking risk
and can get better returns beating inflation.

4. Government and investment companies should takeinitiative to come forward with full
support for the investors in terms of investors’ awareness, advisoryservices, participation
of investor in portfolio design & management, ensure full disclosure of related
information to the investors.

5. Proper consultancy should be given to the investors after identifying their needs &
make them understand terms, conditions and operations of different
schemes.Information shouldbe published in investor friendly language and style, effective
grievance system, education on investors’ right andmore control on asset management
companies should be there. So that more investorscould step forward which will
ultimately leads to the development of economy.

Submitted To,
Dr. Tripti Dubey

Submitted By,
Pradduman Dandotiya
Pradhuman Malviya
Prateek Hingorani
Pratibha Parmar
Praveen Joshi
Prachi Yadav
Payal Yadav