Introduction- The Growing Popularity of Mutual Funds in India.

The mutual fund industry in India is growing at an exponential pace. The Indian mutual fund industry
recorded an Average Assets Under Management (AAUM) of Rs. 23.16 trillion as on February 28,
2019.

There are as many as 44 AMFI (Association of Mutual Funds in India) registered fund houses in India
which together offer more than 2,500 mutual fund schemes.

The wide array of funds often makes it a little difficult for investors to choose the best scheme for
them. And so, to ease this process, the study listed the 10 most popular mutual fund houses in India
along with the 10 most popular schemes across all mutual fund categories namely equity, debt and
hybrid.

Objective of the Study

The main objective of the study was to understand the growth of mutual funds over the years and
the reasons for the same. It pondered upon questions like Why people choose mutual fund
investments? How has the mutual fund industry grown over the last ten years? And… Who were the
major players?

What are Mutual Funds?

A mutual fund is an open-end professionally managed investment fund that pools money from many
investors to purchase securities.

They are very attractive to investors because Mutual funds guarantee minimum risk and maximum
return.

TYPES OF MUTUAL FUNDS-

1. Small-cap fund- In these types of funds, the asset manager invests money only in stocks of
small-cap companies. The company's market capitalization ranges from US$ 300 million to US$ 2
billion.

2. Mid-cap fund- Here, the asset manager invests money only in stocks of mid-cap companies.
Their market capitalization ranging from US$ 2 billion to US$ 10 billion.

3. Large-cap fund- The asset manager invests money in stocks of large-cap companies whose
market capitalization is over US$ 10 billion.

4. Hybrid funds- It is an investment fund wherein the investor invests money in two or more asset
classes, typically a mix of stock and equity.

5. Debt funds- Investment in these types of funds give a fixed rate of interest with the least risk
and a low return. For eg: Govt. Secudties, treasury bills, and other money market instruments. The
fundamental reason for investing in debt funds is to earn a steady interest income and capital
appreciation.

6. Liquid funds- Liquid funds are debt funds that invest in fixed-income securities that mature
within 91 days, such as certificates of deposit, commercial papers, and other debt instruments.
There is no lock-in period in liquid funds. On business days, liquid fund redemption requests are
fulfilled within 24 hours. Liquid funds have a relatively low-risk profile. Liquid funds are the least
problematic of all debt fund types since they primarily invest in high-quality fixed-income
securities with short maturities.

7. Short-term bond funds- These are open-ended short-term debt schemes that invest in
instruments with maturity duration between one and three years.

8. Medium-term bond funds- These funds invest in fixed income markets and have a maturity
period ranging between five and ten years.

9. Long-term bond funds- These are one type of mutual funds that invest in bonds that range
between more than ten years and up to twenty years.

MOST POPULAR MUTUAL FUND HOUSES IN INDIA

S.no Name of Fund House Assets Under

Management( in cr)

1. HDFC Mutual Fund Rs. 3,42,525

2. ICICI Prudential Mutual Fund Rs. 3,21,281

1. HDFC Mutual Fund: HDFC Asset Management Company and is currently the largest and
actively managed mutual fund company in India. It was considered as most profitable (AMC)
in the country as of 31 March, 2018. Even the company manages assets worth Rs. 3.43 Lakh
Crore as of 31 March 2019.

HDFC recorded a 16.2% active market share. The Company has about 210 branches in more than
200 cities around India.It has 53 lakh investors with around 91lakh live accounts.

2. ICICI Prudential Mutual Fund : ICICI Prudential Mutual Fund is one of India's top 2 largest
Asset Management Companies. As well as one the oldest Mutual Funds. Most of their
offerings are rated "AAAmfs" which is a high degree of confidence and reliability.

 ICICI Prudential was set up in 1993 jointly by ICICI Bank and Prudential acting as partners. The
Prudential Group is one of the world's oldest, largest insurance companies.

 According to statistics made available as of 30th September 2018, the Average Assets Under
Management of ICICI Pru Mutual Fund, as it is also known, is Rs 3.1 Lakh Crore. As of 31
March, 2019, it manages assets worth over Rs. 3.2 Lakh Crore.

 The organisation has some of the best-known fund managers in the business, and it is
growing at a rapid pace.

 ICICI Prudential Mutual Fund has its headquartered in Mumbai. You can deposit a lump sum
or start an SIP with ICICI Prudential via Groww which is an app under google with minimal
documentation and in a very short period of time.
Am now going to introduce 2 most popular schemes but before that:

5 Parameters to Analyze a Mutual Fund

 Returns

One of the most common criteria used to compare mutual fund schemes. Usually investors look at
the 1 year, 3 years, and 5-year returns of different schemes to compare them.

 Expense Ratio

Expense ratio is the percentage of total assets that a mutual fund charges an investor annually for
managing their money.

 Risk Level :

In the world of mutual funds, risk and returns are 2 sides of the same coin. The risk is defined so
that the investor should be aware as to how much he should invest or how much he could bear.

Usually, the risk is divided into 5 categories- low, moderately low, moderate, moderately high and
high.

 Net Asset Value (NAV)

It is the market value of all securities held by the mutual fund scheme.

It is calculated as the total value of the entity’s assets minus the total value of its liabilities.

 Exit Load :

An exit load refers to the fee that the Asset Management Companies (AMCs) charge investors at
the time of exiting their fund units.

Lets now look at Mutual Fund Schemes:

1. HDFC Liquid Fund

 Returns and AUM

Name of the scheme AUM Type of 1 yr return 3 yr 5 yr

scheme return return
(in Cr)

HDFC Liquid Fund 87799.02 Debt 7.27% 7.00% 7.54%

 Expense Ratio - 0.20

 Risk Level - Moderately low

  Net Asset Value - ₹ 3981.23

 Exit Load - 0.007%

2. ICICI Prudential Liquid Fund

 Returns and AUM

Name of the scheme AUM Type of 1 yr return 3 yr 5 yr

scheme return return
(in Cr)

ICICI Prudential Liquid 68726.96 Debt 7.33% 7.08% 7.59%

Fund

  Expense Ratio - 0.20

 Risk Level - Moderately low

 Net Asset Value - ₹ 299.75

 Exit Load - 0.007%

GROWTH OF THE INDIAN MUTUAL FUND INDUSTRY

Indian stock markets were in a bit of unrest in the year 2018 when all the foreign investors dumped
Indian equities worth Rs 33,014 crore and debt instruments worth Rs 47,795 crore. By January 2019,
they had sold equities worth Rs 2,675 crore. Had it not been for the solid participation from
domestic investors, the Indian markets would have witnessed a much steeper fall. The chart below
puts things in perspective. Ten years ago, the total assets under management (AUM of the Indian
mutual fund industry were Rs 4.13 trillion (1 trillion equals 1 lakh crore) as on 31 December 2008.
Over the subsequent five years, the industry grew at a compound annual growth rate (CAGR) of 15%
to take the total AUM to Rs 8.2 trillion as on 31 December 2013. Thereafter, the Indian mutual fund
industry took off like never before, compounding at 23% CAGR, and taking the total AUM as on 31
December 2018 to Rs 22.86 trillion. In just 10 years, the AUM of the Indian MF Industry has
multiplied 5.5 times, compounding at 19% CAGR. The total number of mutual fund folios as on 31
December 2018 stood at 8.03 crore (80.3 million).

THE REASONS FOR GROWING POPULARITY OF MUTUAL FUNDS

The following are some of the reasons for growing popularity of mutual funds:

1. Banks, public provident funds and some other government schemes offered a very low rate of
interest.

2. Compare to bank fixed deposits, Mutual funds offer very high rate of return. These are the
investments which are helpful to beat inflation.
3. Like bank recurring deposits, mutual funds offer systematic investment plan. We can start mutual
funds even for Rs 500.

4. Now a day’s investment awareness is increased among the investors compare to previous years.
Now SEBI make compulsory for companies to invest some of their profits to spend on creating
investment awareness among the general public.

5. If we want to invest in shares, we have to open demat account and trading account with the
bank. But in mutual funds there is no need to open demat and trading account. This is the best
advantage for investors.

6. In shares if we want to sell our shares, we have to wait for opposite person until buying. Some big
company shares actively trading. In those companies there is no need to worry buying and selling.
But in small companies we have to face some problem to sell shares.

7. In mutual funds investment, if we want our invested money, immediately we redeem and we get
money based on mutual funds within one to three days.

8. In mutual funds there is more diversification. If we invest our money in one mutual fund scheme,
our money is diversified among different companies and those are related to different sectors.

9. In mutual funds long term capital advantage is there compared to bank fixed deposits.

10. Mutual funds offer some tax saving funds like equity linked savings scheme. There are some
locking period. After completion of the period, we can redeem our investments. This is also one of
the main reasons for increasing investments in mutual funds.