Strength of Competition To understand the competition from rest of investment opportunities, I have prov ided for a graph below:

As you can see, the most return is provided by equity among all asset classes du ring 1980-2006. So those who wants to build up corpus, needs to look at longer t ime frame, suitably plan and manage their investments. Leave it to the professio nals to manage funds. Mutual Funds bring you Diversification of portfolio, Profe ssional Management, Risk Reduction, Transaction Costs, Liquidity and Convenience & flexibility.

Who are the major competitive players? HDFC Mutual Fund 4675745 (11.10% ) UTI Mutual Fund 4254817 (10.10% ) ICICI Prudential Mutual Fund 4190246 (9.95% ) Birla Sun Life Mutual Fund 3658075 (8.69% ) SBI Mutual Fund 2500367 (5.94% ) Franklin Templeton Mutual Fund 1941871 (4.61% ) Total for Industry 42111648 (100% ) Source:www.amfiindia.com Competitive rivalry is not acute. Top 4 occupy 33.3% of AUM in 2007 and it has b ecome 57.82% in 2008. The equity schemes offer more in management fees. Obviousl y the competitive rivalry to remain always number 1in AUM, to break-even or earn better profits always drives the players. The differentiating platform is the s ervice & the technology to support such services. Having created the level playi ng field by bifurcating all Assured Return products out of UTI MF, by 2003 the s tage is all set for the real match. By offering actively managed equity schemes with an institutional tilt, Reliance occupied the front seat in a short period. The industry continues to be tilted in favour of institutional funds in terms of AUM. In order to remain competitive, MFs adjust on Entry load, Exit load, Contingent Differed Sales Charges(CDSC), Expenses ratio as in the case of Index Funds and B ond Funds; CDSC has become more fashionable than one time exit load. The aboliti on of entry load on direct applications and initial issue expenses on closed end schemes would require more innovative pricing from MFs. Product differentiation has gone to the extent of making SIPs with a minimum of Rs 50.00 to Rs 100.00 in monthly installments both as a measure of inclusion as also a method of long term relationship building. Tied up with Self Help Groups for pension products(UTI MF, ICICI Prudential MF)/Employers for tax saving schem es(Reliance MF)MFs try to outwit each other. New products like Gold ETF, Reality Sector oriented debt funds, New management S tyles like Formula plans(Quant Funds) reveal the inner strength of the MFs. The year 2008 saw the unveiling of Equity Linked Derivatives as major part of portfo lio in schemes led by ICICI Prudential Mutual Fund. Another feature of 2008 was the combination of Gold ETF and Equity in same portfolio from the UTI MF. The Entry Barriers are not so strong. A Sponsor with a good track record capable of investing 40% networth of a minimum 10 crore networthed AMC can enter the tr ade by paying an application money Rs 1 lakh, Registration fees Rs 50 lakhs. Eve ry OD filing will necessitate paying 0.03% of NFO collections with a minimum of Rs 1 lakh, the maximum being capped at Rs 1 crore and annual renewal fees Rs 50 lakh are what it takes to operate a MF. That leaves a neat 10 crores or 16 crore s for your topline depending upon whether you are a no-load operator or not.!!!

OD filing fees has been revised w e f 01/04/2008 to 0.005% of collections; and t he upper limit @ Rs 50 lakh. The registration fees also reduced to Rs 25 lakhs.T he 6% Initial Issue expenses gets replaced with normal load w e f 01/02/2008. No load for direct applications w e f 04/02/2008. As the existing players are enco uraged to bring in additional products, there is a raising of entry bar for new players after the change in leadership at SEBI. 2009 may see listing of AMCs;In 2008, UTI MF was planning IPO. Now that has come to stake sale consequent to market meltdown; it will force some amount of marke t discipline in the AMC s management. 2008 saw 5 new fund houses getting into action including Bharati Axa and some distributor turned MFs

Exit barriers are also weak in the Indian MF industry just like the entry barrie rs. It may be by surrendering the certificate of registration as in the case of GE Mutual Fund (formerly known as SRF Mutual Fund) on the advice of SEBI because they have not launched any scheme and no funds were collected from the public. The SEBI may cancel the certificate of registration of mutual funds and withdraw the approval granted to respective AMCs as in the case of GFC Mutual Fund and A sia Pacific Mutual Fund during 1999-2000. They also had not launched any schemes and no funds were collected from the public. During 1999-2000 ITC Threadneedle Mutual Fund, Apple Mutual Fund and HB Mutual F und migrated to Zurich India Mutual Fund, Birla Mutual Fund and Taurus Mutual Fu nd respectively. ITC Threadneedle Mutual Fund, Apple Mutual Fund and HB Mutual F und surrendered their certificates of registration. In case of HB Mutual Fund an d Taurus Mutual Fund, there was merger of their asset management companies and t rustee companies 2 By now scheme migrations have become common. Partial/Full selling of stake also manifested by the industry showing the maturity acquired. By March 2008, Standar d Chartered plc succeeded in selling the Indian AMC to Infrastructure Developmen t finance company Ltd(IDFC) for USD 205 million in an all cash deal for AUM of U SD3.25 billion with 22% in equities. The strong and detailed regulation coupled with growing investor awareness and s pread of computer literacy, the supplier power/buyer power is under check. But t he weak link is the distribution that unites both suppliers and buyers. Buyer Power 2009 opportunities for India unfold in infrastructural, banking and financial se rvices sector. They are high risk , high return equity schemes in the MF world. Now let us look where does Mutual funds stand in the Household Savings in India. In fact bank deposits share has increased in the year ended March 2007. Shares and Debentures consist of sub-classes like Private Corporate Business, Ba nking, Units of UTI, Bonds of Public Sector Undertakings and Mutual Funds. From 2005-06 both of the classes of Units of UTI and PSU Bonds have become redundant. Mutual Funds are a miniscule portion in the Shares and debenture category that increased from 3.6% to 4.8% as the aggregate class moved from 4.9% to 6.3% The awareness has increased in the urban markets thanks to the Public Sector Mut ual Funds like UTI, Canbank, etc.. and the Morgan Stanley Mutual Fund who taught the investors what to expect and what not to expect. The growth in the ICE sect or has amplified the service facilities and normally service standards are maint ained at reasonable levels. The regulation has stipulated minimum time for deliv ery of services and rights and duties of the investor. However, the institutional investors are able to make MFs pay through their nose as evidenced in October 2008 liquidity crunch in the industry. Mainly invested into CDs and CPs, this class of liquid funds is less taxed among the debt funds.

Banks were not prepared to extend assistance, although MF regulation permits MF s to borrow funds to tie over temporary liquidity problems. Eventually RBI creat ed a special window for access for funds and SEBI moderated debt valuation norms . Supplier Power The mutual funds are offerings of products and service levels achieved by them i n the urban markets. The penetration to rural markets is low mostly due to absen ce of regulatory pressure like in the Insurance industry to serve that market. F unds like Bharati Axa have started 0 balance facility to woo customers from the rural area or are hesitant to start investing in Mutual funds. Compared to buyer s, suppliers are in a demanding position as the recourse to investor is to aband on only. Increasing competition has brought in different variants in the debt ma rket beyond Money Market Funds, Gilt Funds and Long Term Debt Funds. Notable fea ture is of FMPs, Interval funds, Liquid Funds and ELDs. ETFs have com eon indice s and Commodity like gold. On the equity side we have arbitrage funds, internati onal funds in addition to exhotic themes and sectoral funds. Suppliers face threat from distribution as evidenced by Edelweis, Fortis, etc wh o were one time distributors now doning the manmtle of MFs. Erstwhile brokerage houses Motilal Oswal, India Infoline, Indiabulls also lining up their MFs. Anoth er factor contributed to this, is the SEBI mandate of identified accounts for cu stomers under Portfolio Management Services that used to be offered by them. Whe n pooling restrictions were imposed, best way is to acknowledge true identity. T hey all have well developed geographical reach and internet based touch points w ith customers. Today we have internet access with or without transaction capability via PC, Mob ile phone, ATMs, Touch screens, branches of AMCs and Franchisees in the direct d istribution process. IFAs, Banks, Brokers, Distribution Companies, Post Office, Supermarkets, Petrol Pumps all have joined the party. Over 60,000 ARMFAs are eng aged as the IFAs. Cinema tickets to Singapore tickets dangles before the Mutual Fund Advisor when the rat race for AUM occurs. The survey conducted by ET-BCG fo r the period ending March 2007 brought to light that the distribution companies earned Rs 4000 croes as against the AMCs Rs 2100 to Rs 2500 crores as revenue. T hat is to say that 60% of the revenue in the MF market reached the distribution only.