MUTUAL FUNDS IN INDIA

A Broad Industry Outlook

CONCEPT

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realised are shared by its unit holders in proportion to the number of units owned by them.

MUTUAL FUND OPERATION FLOWCHART

ADVANTAGES
Professional Management Diversification Return Potential Low Costs Liquidity Transparency Flexibility Choice of schemes Tax benefits Well regulated

DISADVANTAGES
Costs Control Not in the Hands of an Investor No Customized Portfolios Difficulty in Selecting a Suitable Fund Scheme Dilution

TYPES OF MUTUAL FUNDS

Equity Funds Debt/Income Funds Money Market/Liquid Funds Hybrid Funds Gilt Funds Others

Commodity Funds Real Estate Funds Exchange Traded Funds Fund of Funds

HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

First Phase 1964-87 Second Phase 1987-1993 (Entry of Public Sector Funds) Third Phase 1993-2003 (Entry of Private Sector Funds) Fourth Phase since February 2003

BROAD INDUSTRY OUTLOOK FOR MUTUAL FUNDS IN INDIA

CONTENTS IN THIS SECTION

FIIs vs. Mutual Funds: Net Investments; A Comparison. Net Investments by Mutual Funds in the Indian Markets Mobilization of Funds

Public Sector vs. Private Sector For Various Types Of Schemes

Average net assets under management Net asset values for various types of schemes Unit holding pattern of mutual fund industry

FIIs vs. Mutual Funds: Net Investments; A Comparison

FIIS: NET INVESTMENTS

*In Rs. Crore

MUTUAL FUNDS: NET INVESTMENTS:

*In Rs. Crore

EQUITY INVESTMENTS: MF VS. FIIS

*In Rs. Crore

DEBT INVESTMENTS: MF VS. FIIS

*In Rs. Crore

NET INVESTMENTS BY MUTUAL FUNDS IN THE INDIAN MARKETS

*In Rs. Crore

MOBILISATION OF FUNDS
Sector vs. Public Sector For Various Types Of Schemes
Public

PUBLIC SECTOR VS. PRIVATE SECTOR

*In Rs. Crore

FOR VARIOUS TYPES OF SCHEMES

*In Rs. Crore

AVERAGE NET ASSETS UNDER

MANAGEMENT

*In Rs. Crore

NET ASSET VALUES FOR VARIOUS TYPES OF

SCHEMES

*In Rs. Crore

Unit holding pattern of mutual fund industry:

For

the industry as a whole. For private sector mutual funds. For public sector mutual funds.

FOR THE INDUSTRY AS A WHOLE.

FOR PRIVATE SECTOR MUTUAL FUNDS.

FOR PUBLIC SECTOR MUTUAL FUNDS.

CONCLUSION

The MF industry is poised to enter a phase of consolidation because of:

redemption pressures, lack of new issuances and sinking stock markets.

SOME MERGERS & ACQUISITIONS IN

RECENT YEARS
In late 2008, Religare had acquired Lotus Asset Management Company. December 2007, Reliance Capital sold about 5% of its fund unit for Rs 500 crore to Eton Park. In October 2007, Pioneer Investments picked up a 51% stake in Bank of Barodas Asset Mangement Company. In 2006, Canara Bank sold 49% stake in its asset management subsidiary Canbank Investment Management Services to the Netherlands-based Robeco Group NV.