THE ASSIGNMENT

ON
DEVELOPMENT OF MUTUAL
FUND IN INDIA

Presented By,

Meaning of mutual fund
:t:, I:nd is one oI the investment instr:ments, where yo: provide yo:r money to ,
I:nd ho:se ,nd ,:thorise them to invest ,nd m,n,e yo:r money. In ret:rn, the I:nd ho:se
p,ys b,. thro:h dividends/bon:s. This is simi,r to Fixed deposit, where b,n p,y yo:
interest Ior the Iixed deposit. B:t be .,reI:, .ert,i :t:, F:nds .,n be RISKY,
espe.i,y those, who ,re ined with Sh,re m,ret. So, pe,se t,e ,dvi.e Irom yo:r
b,ner ,nd now the ris I,.tor beIore investin. Never invest, be.,:se yo:r neihbo:r is
doin so or, someone s,ys th,t he is m,in , Iort:ne Irom m:t:, I:nds.

There .,n be diIIerent type -
1) Eq:ity Oriented (Hih Ris, Hih ret:rn): Go Ior this, iI yo: .,n t,e hih ris. This
type oI I:nd :s:,y p:t yo:r 100 money in Eq:ity m,ret, whi.h is very m:.h vo,tie

2) Hybrid/B,,n.ed I:nd |edi:m ris, Av Ret:rn|: this type oI I:nd invest yo:r money
in both Eq:ity m,ret ,nd Govt Bonds in 50-50 r,tio.

3) Bond F |Low ris, Ret:rn re,ter th,n B,n Fixed deposit|: These I:nds p:t money
in Govt bonds, RBI bonds et., whi.h ,re ener,y b,.ed :p Ior ins:red ret:rn.

Dependin on yo:r ris ,ppetite ,nd e,rnin ,s we ,s I,miy i,biities, yo: m:st
.,reI:y .hoose the mI Ior , ni.e ret:rn.
Investment Policies & Restrictions
(,) The A :ses , 'p,ssive ,ppro,.h to try ,nd ,.hieve s.heme investment obje.tive.
The
S.heme invests in od ,s ,n ,sset re,rdess oI s:.h investment merit.
(b) UTI God sh,re wi invest ,t e,st 90 oI its tot, ,ssets in the God or od re,ted
Se.:rities. It m,y hod :p to 10 oI their tot, ,ssets in .,sh or money m,ret se.:rities.
(.) The F:nd ,n,er wo:d monitor the tr,.in error oI the s.heme on ,n onoin b,sis
,nd
Wo:d see to minimise tr,.in error to the m,xim:m extent possibe. There is no
Ass:r,n.e or :,r,ntee th,t the s.heme wi ,.hieve ,ny p,rti.:,r eve oI tr,.in error
Re,tive to perIorm,n.e oI the ben.hm,r Index.
(d) A the Investment de.ision wi be t,en by the desin,ted F:nd ,n,er :nder the
S:pervision oI hieI Investment OIIi.er.
(e) The s.heme wi not ,..ept :nderwritin ,nd s:b :nderwritin obi,tions.
(I) (i) This s.heme m,y p,rti.ip,te in the se.:rities endin pror,mme, in ,..ord,n.e
with the
Terms oI se.:rities endin s.heme ,nno:n.ed by SEBI. The ,.tivity sh, be .,rried o:t
Thro:h ,pproved intermedi,ry.
(ii) II m:t:, I:nds ,re permitted to borrow se.:rities, the s.heme m,y, in ,ppropri,te
ir.:mst,n.es borrow se.:rities in ,..ord,n.e with SEBI :ideines in th,t re,rd.
() UTI God sh,re :nits wi be hed in dem,teri,ised Iorm. The r:e oI SEBI
(Depositories
And P,rti.ip,nts) Re:,tions, 1996 wo:d ,ppy. The servi.e .h,res p,y,be to the
Depository p,rti.ip,nt wi Iorm p,rt oI ,nn:, re.:rrin expenses.
UTI-God Ex.h,ne Tr,ded F:nd
15
(h) The s.heme sh, not invest more th,n 10 oI :nits NAV in debt instr:ments iss:ed by
, sine
Iss:er, whi.h ,re r,ted not beow investment r,de by , .redit r,tin ,en.y ,:thorised to
.,rry
O:t s:.h ,.tivity by SEBI. Provided th,t this imit sh, not be ,ppi.,be to investments in
money
,ret instr:ments ,nd Government Se.:rities.
(i) The s.heme sh, not invest more th,n 10 oI its NAV in :nr,ted debt instr:ments
iss:ed by ,
Sine iss:er ,nd the tot, investment in s:.h instr:ments sh, not ex.eed 10 oI the
NAV oI the
S.heme. A s:.h investments sh, be m,de with the prior ,pprov, oI the Bo,rd oI
Dire.tors ,nd
Bo,rd oI the A.
UTI :t:, F:nd m,y .onstit:te .ommittees who .,n ,pprove propos,s Ior investments
in
Unr,ted instr:ments. However, the det,ied p,r,meters Ior s:.h investments sh, be
,pproved by
the UTI A Bo,rds ,nd the Bo,rd oI Tr:stees. The det,is oI s:.h investments sh, be
omm:ni.,ted by UTI A to the Tr:stees in their periodi., reports. However, in .,se
,ny
se.:rity does not I, :nder the p,r,meters, the prior ,pprov, oI the Bo,rds oI A ,nd
Tr:stees
Sh, be req:ired.
(j) Debent:res, irrespe.tive oI ,ny resid:, m,t:rity period (,bove or beow one ye,r),
sh, ,ttr,.t the
Investment restri.tions ,s ,ppi.,be Ior debt instr:ments ,s spe.iIied :nder .,:se 6 (h)
,nd (I)
Above. It is I:rther .,riIied th,t the investment imits ,t 5 (h) ,nd (i) ,bove ,re ,ppi.,be
to ,
Debt se.:rities, whi.h ,re iss:ed by p:bi. bodies/instit:tions s:.h ,s ee.tri.ity bo,rds,
m:ni.ip,
orpor,tions, st,te tr,nsport .orpor,tions et.. :,r,nteed by either st,te or .entr,
overnment.
Government se.:rities iss:ed by entr,/St,te overnment or on its beh,I by RBI ,re
exempt
From the ,bove investment imits.
() No term o,ns wi be ,dv,n.ed by this s.heme Ior ,ny p:rpose ,s per SEBI re:,tion
44(3) oI
SEBI (:t:, F:nds) Re:,tions 1996.
() Pendin depoyment oI I:nds oI the s.heme in se.:rities in ,..ord,n.e with the
investment
Obje.tive oI the s.heme ,s st,ted ,bove, I:nds m,y be invested in short-term deposits oI
s.hed:ed
ommer.i, b,ns.
(m) The S.heme sh, not m,e ,ny investment in ,ny I:nd oI I:nd s.heme.

The Evolution

The Iorm,tion oI Unit Tr:st oI Indi, m,red the evo:tion oI the Indi,n m:t:, I:nd
ind:stry in the ye,r 1963. The prim,ry obje.tive ,t th,t time w,s to ,ttr,.t the sm,
investors ,nd it w,s m,de possibe thro:h the .oe.tive eIIorts oI the Government oI
Indi, ,nd the Reserve B,n oI Indi,. The history oI m:t:, I:nd ind:stry in Indi, .,n be
better :nderstood divided into Ioowin ph,ses:

Phase 1. Establishment and Growth of Unit Trust of India - 1964-87

Unit Tr:st oI Indi, enjoyed .ompete monopoy when it w,s est,bished in the ye,r 1963
by ,n ,.t oI P,ri,ment. UTI w,s set :p by the Reserve B,n oI Indi, ,nd it .ontin:ed to
oper,te :nder the re:,tory .ontro oI the RBI :nti the two were de-ined in 1978 ,nd
the entire .ontro w,s tr,nsIerred in the h,nds oI Ind:stri, Deveopment B,n oI Indi,
(IDBI). UTI ,:n.hed its Iirst s.heme in 1964, n,med ,s Unit S.heme 1964 (US-64),
whi.h ,ttr,.ted the ,rest n:mber oI investors in ,ny sine investment s.heme over the
ye,rs.

UTI ,:n.hed more innov,tive s.hemes in 1970s ,nd 80s to s:it the needs oI diIIerent
investors. It ,:n.hed ULIP in 1971, six more s.hemes between 1981-84, hidren's GiIt
Growth F:nd ,nd Indi, F:nd (Indi,'s Iirst oIIshore I:nd) in 1986, ,ster sh,re (Indi,'s
Iirst eq:ity diversiIied s.heme) in 1987 ,nd onthy In.ome S.hemes (oIIerin ,ss:red
ret:rns) d:rin 1990s. By the end oI 1987, UTI's ,ssets :nder m,n,ement rew ten times
to Rs 6700 .rores.

Phase II. Entry of Public Sector Funds - 1987-1993

The Indi,n m:t:, I:nd ind:stry witnessed , n:mber oI p:bi. se.tor p,yers enterin the
m,ret in the ye,r 1987. In November 1987, SBI :t:, F:nd Irom the St,te B,n oI
Indi, be.,me the Iirst non-UTI m:t:, I:nd in Indi,. SBI :t:, F:nd w,s ,ter Ioowed
by .,n b,n :t:, F:nd, LI :t:, F:nd, Indi,n B,n :t:, F:nd, B,n oI Indi,
:t:, F:nd, GI :t:, F:nd ,nd PNB :t:, F:nd. By 1993, the ,ssets :nder
m,n,ement oI the ind:stry in.re,sed seven times to Rs. 47,004 .rores. However, UTI
rem,ined to be the e,der with ,bo:t 80 m,ret sh,re.
1992-93
Amo:nt
obiised
Assets Under
,n,ement
obiis,tion ,s oI ross
Domesti. S,vins
UTI 11,057 38,247 5.2
Public Sector 1,964 8,757 0.9
Total 13,021 47,004 6.1



Phase III. Emergence of Private Sector Funds - 1993-96

The permission iven to priv,te se.tor I:nds in.:din Iorein I:nd m,n,ement
.omp,nies (most oI them enterin thro:h joint vent:res with Indi,n promoters) to enter
the m:t:, I:nd ind:stry in 1993, provided , wide r,ne oI .hoi.e to investors ,nd more
.ompetition in the ind:stry. Priv,te I:nds introd:.ed innov,tive prod:.ts, investment
te.hniq:es ,nd investor-servi.in te.hnooy. By 1994-95, ,bo:t 11 priv,te se.tor I:nds
h,d ,:n.hed their s.hemes.

Phase IV. Growth and SEBI Regulation - 1996-2004

The m:t:, I:nd ind:stry witnessed rob:st rowth ,nd stri.ter re:,tion Irom the SEBI
,Iter the ye,r 1996. The mobiis,tion oI I:nds ,nd the n:mber oI p,yers oper,tin in the
ind:stry re,.hed new heihts ,s investors st,rted showin more interest in m:t:, I:nds.

Investor`s interests were s,Ie:,rded by SEBI ,nd the Government oIIered t,x beneIits to
the investors in order to en.o:r,e them. SEBI (:t:, F:nds) Re:,tions, 1996 w,s
introd:.ed by SEBI th,t set :niIorm st,nd,rds Ior , m:t:, I:nds in Indi,. The Union
B:det in 1999 exempted , dividend in.omes in the h,nds oI investors Irom in.ome t,x.
V,rio:s Investor Aw,reness Pror,mmes were ,:n.hed d:rin this ph,se, both by SEBI
,nd AFI, with ,n obje.tive to ed:.,te investors ,nd m,e them inIormed ,bo:t the
m:t:, I:nd ind:stry.

In Febr:,ry 2003, the UTI A.t w,s repe,ed ,nd UTI w,s stripped oI its Spe.i, e,
st,t:s ,s , tr:st Iormed by ,n A.t oI P,ri,ment. The prim,ry obje.tive behind this w,s to
brin , m:t:, I:nd p,yers on the s,me eve. UTI w,s re-or,nised into two p,rts: 1.
The Spe.iIied Undert,in, 2. The UTI :t:, F:nd

Presenty Unit Tr:st oI Indi, oper,tes :nder the n,me oI UTI :t:, F:nd ,nd its p,st
s.hemes (ie US-64, Ass:red Ret:rn S.hemes) ,re bein r,d:,y wo:nd :p. However,
UTI :t:, F:nd is sti the ,rest p,yer in the ind:stry. In 1999, there w,s , siniIi.,nt
rowth in mobiis,tion oI I:nds Irom investors ,nd ,ssets :nder m,n,ement whi.h is
s:pported by the Ioowin d,t,:
GROSS FUND OBILISATION (RS. RORES)
FRO TO UTI
PUBLI
SETOR
PRIVATE
SETOR
TOTAL
01-Apri-98 31-,r.h-99 11,679 1,732 7,966 21,377
01-Apri-99 31-,r.h-00 13,536 4,039 42,173 59,748
01-Apri-00 31-,r.h-01 12,413 6,192 74,352 92,957
01-Apri-01 31-,r.h-02 4,643 13,613 1,46,267 1,64,523
01-Apri-02 31-J,n-03 5,505 22,923 2,20,551 2,48,979
01-Feb.-03 31-,r.h-03 * 7,259* 58,435 65,694
01-Apri-03 31-,r.h-04 - 68,558 5,21,632 5,90,190
01-Apri-04 31-,r.h-05 - 1,03,246 7,36,416 8,39,662
01-Apri-05 31-,r.h-06 - 1,83,446 9,14,712 10,98,158

ASSETS UNDER MANAGEMENT (RS. CRORES)
AS ON UTI PUBLI SETOR PRIVATE SETOR TOTAL
31-,r.h-99 53,320 8,292 6,860 68,472


Phase V. Growth and Consolidation - 2004 Onwards

The ind:stry h,s ,so witnessed sever, merers ,nd ,.q:isitions re.enty, ex,mpes oI
whi.h ,re ,.q:isition oI s.hemes oI Ai,n.e :t:, F:nd by Bir, S:n LiIe, S:n F&
:t:, F:nd ,nd PNB :t:, F:nd by Prin.ip, :t:, F:nd. Sim:t,neo:sy, more
intern,tion, m:t:, I:nd p,yers h,ve entered Indi, ie Fideity, Fr,nin Tempeton
:t:, F:nd et.. There were 29 I:nds ,s ,t the end oI ,r.h 2006. This is , .ontin:in
ph,se oI rowth oI the ind:stry thro:h .onsoid,tion ,nd entry oI new intern,tion, ,nd
priv,te se.tor p,yers.





Conclusion:
O A m:t:, I:nd brins toether , ro:p oI peope ,nd invests their money in sto.s,
bonds, ,nd other se.:rities.
O The ,dv,nt,es oI m:t:,s ,re proIession, m,n,ement, diversiIi.,tion, e.onomies oI
s.,e, simpi.ity ,nd iq:idity.
O The dis,dv,nt,es oI m:t:,s ,re hih .osts, over-diversiIi.,tion, possibe t,x
.onseq:en.es, ,nd the in,biity oI m,n,ement to :,r,ntee , s:perior ret:rn.
O There ,re m,ny, m,ny types oI m:t:, I:nds. Yo: .,n .,ssiIy I:nds b,sed on ,sset
.,ss, investin str,tey, reion, et..
O :t:, I:nds h,ve ots oI .osts.
O osts .,n be broen down into onoin Iees (represented by the expense r,tio) ,nd
tr,ns,.tion Iees (o,ds).
O The biest probems with m:t:, I:nds ,re their .osts ,nd Iees.
O :t:, I:nds ,re e,sy to b:y ,nd se. Yo: .,n either b:y them dire.ty Irom the I:nd
.omp,ny or thro:h , third p,rty.
O :t:, I:nd ,ds .,n be very de.eivin.