MUTUAL

FUNDS
TOPICS COVERED
 Concept
 Types of Mutual Fund Schemes

 Advantages of Mutual Funds

 Organisation of a Mutual Fund

 Investment Strategies

 Mutual Fund Market in India

 Growth of Mutual Fund Industry in India

 Future of Mutual Fund in India

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
FLOW CHART

Investors
Given back to
Pool their money in

Return Fund

That generates Which is invested in

Securities
ADVANTAGES OF MUTUAL FUNDS
TYPES OF MUTUAL FUNDS
 No matter what type of investor you are, there is bound to be
a mutual fund that fits your style.
 It's important to understand that each mutual fund has
different risks and rewards.
 In general, the higher the potential return, the higher the risk
of loss.
 Although some funds are less risky than others, all funds have
some level of risk - it's never possible to diversify away all risk.
This is a fact for all investments.

 Each fund has a predetermined investment objective that

tailors the fund's assets, regions of investments and
investment strategies. At the fundamental level, mutual funds
can be classified on three parameters:
 On the basis of structure.
 On the basis of investment objective.
 On the basis of special schemes.
TYPES OF MUTUAL FUNDS
Type of
Mutual Fund
Schemes

Special
Investment
Structure Schemes
Objective

Open Ended Industry Specific

Growth Funds
Funds Schemes
Close Ended Index
Income Funds
Funds Schemes
Sectoral
Balanced Funds
Schemes
Money Market
Funds
ON THE BASIS OF STRUCTURE
 Open ended Schemes
 Closed ended Schemes.
OPEN ENDED SCHEMES
 Open ended Schemes are schemes which offers
unit for sale without specifying any duration for
redemption.
 They sell and repurchase schemes on a continuous
basis.
 The main feature of such kind of scheme is liquidity
CLOSED ENDED SCHEMES
 These are the schemes in which redemption period
is specified.
 Once the units are sold by mutual funds, then any
transaction takes place in secondary market only i.e
stock exchange.
 Price is determined by forces of market.
ON THE BASIS OF GROWTH
OBJECTIVE

 Growth funds
 Income funds

 Balanced Funds

 Money Market funds

GROWTH FUND
 The aim of growth funds is to provide capital
appreciation over the medium to long- term. Such
schemes normally invest a major part of their
corpus in equities. Such funds have comparatively
high risks
INCOME FUNDS
 Funds that invest in medium to long-term debt
instruments issued by private companies, banks,
financial institutions, governments and other entities
belonging to various sectors (like infrastructure
companies etc.) are known as Debt / Income Funds
BALANCED FUND
 These funds provide both growth and regular
income as these schemes invest in debt and equity.
 The NAV of these schemes is less volatile as
compared pure equity funds.
MONEY MARKET FUNDS
 Money market / liquid funds invest in short-term
(maturing within one year) interest bearing debt
instruments.
 These securities are highly liquid and provide safety
of investment, thus making money market / liquid
funds the safest investment option when compared
with other mutual fund types.
ON THE BASIS OF SPECIAL
SCHEMES
 Industry Specific Schemes
 Index Schemes

 Sectoral Schemes.
INDUSTRY SPECIFIC SCHEMES
 Industry Specific Schemes invest only in the
industries specified in the offer document.
 The investment of these funds is limited to specific
industries like Infotech, FMCG, Pharmaceuticals etc
INDEX SCHEMES
 In this schemes, the funds collected by mutual
funds are invested in shares forming the Stock
Exchange Index.
 Example- Nifty Index Scheme of UTI Mutual Fund
and Sensex Index Scheme of Tata Mutual Fund.
SECTORAL SCHEMES
 Sectoral funds are those mutual funds
which invest in a particular sector of the
market, e.g. banking, information
technology etc.
 Sector funds are riskier than equity
diversified funds since they invest in shares
belonging to a particular sector which gives
them fewer diversification opportunities
OTHER SCHEMES
 Gilt Security Schemes
 Funds of Funds

 Domestic Funds

 Tax Saving Schemes.

ORGANISATION OF A MUTUAL FUND
INVESTMENT STRATEGIES
 Systematic Investment Plan (SIP)
 Invest a fixed sum every month. (6 months to 10
years- through post-dated cheques or Direct Debit
facilities)
 Fewer units when the share prices are high, and more
units when the share prices are low.
 Convenience and Discipline are the benefits of SIP.

 Systematic Withdrawal Plan (SWP)

Is a facility provided by a mutual fund to withdraw
money on a regular basis.
MUTUAL FUNDS IN INDIAN
CAPITAL MARKET

 First Phase – 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of
Parliament. At the end of 1988 UTI had Rs.6,700 crores of
assets under management.

 Second Phase1987-1993( Entry of Public Sector Funds)

SBI MF marked the entry of non- UTI, public sector mutual
funds set up by public sector banks and Life Insurance
Corporation (LIC) and General Insurance Corporation of India
(GIC). SBI Mutual Fund was the first non- UTI Mutual Fund
established in June 1987. At the end of 1993, the mutual fund
industry had assets under management of Rs.47,004 crores.
Third Phase-1993-2003(Entry of Private Sector Funds)
1993 was the year in which the first Mutual Fund Regulations
came into being, under which all mutual funds, except UTI
were to be registered and governed. The erstwhile Kothari
Pioneer (now merged with Franklin Templeton) was the first
private sector mutual fund registered in July 1993. As at the
end of January 2003, there were 33 mutual funds with total
assets of Rs. 1,21,805 crores.

Fourth Phase – since February 2003

There have been several amalgamation of mutual funds. The
MF have also become popular among retail investors. There
were 28 mutual funds operating in India in April,2005.
GROWTH IN MF INDUSTRY IN INDIA
 The size of Indian mutual fund industry has grown in
recent few years.
 The total AUM has increased from Rs.1,01,565 crores
in January 2000 to 25.49 lakh crore in April-June
2019
 As on June 2019, there were 44 Funds with 391
schemes and assets under management with Rs 1,
02,849 crores.
 HDFC MF continued to lead the pack with an AUM of
Rs 3,62,538 crore (excluding fund of funds) at the end
of the June quarter, followed by ICICI Prudential MF
(Rs 3,37,286 crore) and SBI MF (Rs 3,07,534 crore).
SCOPE OF GROWTH OF MUTUAL FUNDS
IN INDIA
 Indian Mutual Funds Future - Growth Facts
 In India, the rate of saving is 23 %.
 Indians save Rs 20-30 lakh crore every year, which indicates
immense scope for channelizing this saving into MF industry
 In India, asset base of mutual funds as a percentage of GDP
is just 11 per cent, while the world average is 62 per cent.
 “When it comes to the share of MFs in the market
capitalisation, it is less than 5 per cent in India, which only
proves the huge market potential,
 One of the major factors contributing to the growth of this
industry has been the booming stock market with an optimistic
domestic economy.
 Second most important reason for this growth is a favorable
regulatory regime which has been enforced by SEBI. This
regulatory board has improved the market surveillance to
protect the investor’s interest.
SCOPE OF MUTUAL FUNDS IN INDIA

 In the future, there lies a big scope for the Indian Mutual
Funds industry to expand.
 Several asset management companies which are
foreign based are now entering the Indian markets.
 A number of commodity Mutual Funds will be introduced
in the future. The SEBI (Securities Exchange Board of
India) has granted the permission for the same.
 More emphasis is put on the effective Mutual Funds
governance.
 There is also enough scope for the Indian Mutual funds
to enter into the semi-urban and rural areas.
 Financial planners will play a major role in the Mutual
Funds market by providing people with proper financial
planning.
FUTURE PROSPECTS
 Population-Currently, less only 8% of Indians invest
in mutual funds and still India is among the top
mutual funds industries in the world
 Education/Awareness-Many Indians would prefer
to be “conservative” and invest their money in
FD/PPF because they think mutual funds are too
risky. As people are made aware or educated about
mutual funds this will change.
 Convenient Investing-Every individual does not
have the time or skill to study the markets and make
appropriate investments. Mutual funds offer the
investors professional management, diversification
benefits, various funds to choose from and a reliable
source to earn returns over a short or long period of
time.