Mutual funds


With the increasing emphasis in domestic savings and their mobilization and allocation towards profitable investments, the need and scope of mutual fund operations has increased. The mutual funds is one of the important classes of financial intermediaries which enables millions of small and large savers spread across the country as well as internationally to participate in and derive the benefits of the capital market growth. It is an alternative vehicle of intermediation between the suppliers and users of investable financial resources which is becoming increasingly popular in India and aboard due to higher investor return and relativity low risk and cost. Thus the involvement of mutual funds in the transformation of Indian economy has made it urgent to view their services not only as financial intermediary but also as pace settlers as they are playing role in mobilizing and efficient allocation of investable funds through markets. The fact is that the mutual funds have a lot of potential to grow but to capitalize the potential fully, it would need to create and market innovative products and frame distinct marketing strategies. Moreover, the equity culture has not yet developed fully in the country as such, investor education would be equally important for greater penetration of mutual funds. The history of mutual funds dates back to 19thcentury with its origin to Great Britain. Robert Fileming set-up in 1868 the first investment trust under the title ‘Foreign and Colonial Investment Trust’ to manage the  finances of moneyed classes of Scotland by spreading the investment and other investment trusts which were subsequently set-up in Britain and the US, resembled today’s close-ended mutual fund schemes. The first mutual fund in the US namely, Massachusetts Investors’ Trusts, was set up in 1924. In India, the mutual fund industry started in 1963, however, its history has been divided into four phases.


The Mutual funds industry that started its journey in the country in 1963 has turned as one of the important constituents of the financial sector. The industry has witnessed sufficient expansion and standardization in terms of products and services offered, regulatory mechanism, and the proliferation of large number of private sector funds both domestic and foreign. The fact is that the fund market in the country has graduated from offering plain vanilla equity and debt funds, to an array of diverse products such as Gold Funds (GF), Exchange Traded Funds (ETFs), and capital protection oriented funds and even the native funds (Fozia, 2013). Truly, the mutual fund industry in the country has come from long-way but the moot question is thatwhether it has realized its potential fully. In order to answer this question, we would need to critically analyze itsgrowth. For this purpose in the following para’s the growth that the mutual funds industry has achieved over acertain period of time has been analyzed in respect of the following parameters:

  • Number of funds
  • Fund Schemes offered
  • Mobilization of Funds
  • Assets Under Management
  • Household Savings mobilized
  • Performance of AMCs in terms of earnings and profitability

The Indian mutual fund industry has come a long way since its inception in 1963. The industry has witnessed sufficient growth on all parameters be it; number of fund houses, number of schemes, funds mobalised, assets under management etc. One of the important goals of the mutual fund industry is to attrac and mobalise major portion of the House Hold Savings (HHS) in order to enable the small savers to benefit from the economic growth by facilitating them to park their savings into the assets which yield better risk adjusted returns. Therefore, the question arises, has the Indian mutual industry succeeded in achieving this goal? The present study will try to look for the answers. Though, the mutual fund industry has recorded significant progress on all fronts yet it has not been able to utilize its potential fully. On almost on all parameters it is far behind the developed economics and even most of the emerging economics of the world. The industry is confronted with number of challenges like low penetration ratio, lack of product differentiation, lack of investor awareness and ability to communicate value to customers, lack of interest of retail investors towards mutual funds and evolving nature of the industry. Based on the analysis the study suggests that if the industry has to utilize its potential fully, it has to address these challenges.

Contact Now