JAC : A Journal Of Composition Theory ISSN : 0731-6755

THE GROWING POPULARITY OF MUTUAL FUNDS IN INDIA B. Kasi Viswanadham1, Dr. Shailendra Yadav2 1Assistant Professor, 2Head of Department, Narsimha Reddy Engineering College, Hyderabad, Telangana Email: [email protected] & [email protected]

ABSTRACT In recent times, mutual funds get more popularity in India. Previously people invest their money in fixed income schemes like bank fixed deposits, recurring deposits, national savings certificates and chit funds. In previous times banks give 8 to 10 percent rate of interest. But now days, banks offer 6 percent rate of interest. In previous days people don’t have an idea about mutual funds. Now a day’s mutual fund companies and SEBI started investor education towards stock investment and mutual funds. Mutual funds offer different types investment options to the investors. Compare to the shares mutual funds are less risky. Mutual funds are involving risk diversification. Risk diversification is one of the best advantages. The primary objectives of this study are to understand the mutual fund industries in India, their growth from inception and the reasons behind its growth in recent days. Keywords: Mutual Fund, Fixed Deposits, Recurring Deposits, National Saving Certificate, Stock Investment, Shares, Risk Diversification. 1. INTRODUCTION 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. The AAUM of the industry stood Rs. 5.09 trillion on February 28, 2009, which means the Indian mutual fund industry has registered a more than 4 ½ fold increase in a period of 10 years. 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. To ease this process, we list out 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. 2. REVIEW OF LITERATURE In India, the capital market offers investors various investment avenues. The findings of this research study will help investors in their future investment decisions. Mutual funds guarantee minimum risk and maximum return to the investor. This study mainly focuses on the performance of selected equity large-cap mutual fund schemes in terms of risk - various statistical tools used to calculate the performance of selected open-ended equity mutual fund schemes (Narayanasamy, 2013). Michael C. Jensen (1967) discussed risk-adjusted measure of portfolio performance of mutual funds (Jensen‟s alpha) and manager’s capability towards funds return. He measured projecting skill of 115 mutual fund managers in the period 1945-1965.He concluded that managers were on an average not able to predict security. Panigrahi, M.S. (1996), studied growth of the Mutual Fund industry from 1991-92 to 1994-95. He used various statistical techniques like Standard deviation, coefficient of multiple determination and risk free rate of return. The study showed that both UTI and other Mutual Funds grew efficiently during the post liberalization period in terms of investible funds, numbers of investors and number of schemes. Non UTI mutual funds launched many schemes but their growth in terms of investors and number of schemes was not impressive. The Study emphasized that money market mutual funds, bond market mutual funds, sector specific funds and index funds should be developed to satisfy specific needs of the investor. Arnold L. Redman (2000) examined the performance of Global and International mutual funds for five portfolios of international mutual funds. Two benchmarks were taken for the study i.e. vanguard index 500 mutual fund and domestic mutual funds (a portfolio of funds that invest only in U.S. stocks). The risk adjusted returns were calculated by using Sharpe's Index, Treynor’s index and Jensen's Alpha. The five portfolios were World, Foreign, Europe, Pacific and International. Prof. Gauri Prabhu (2000), recognised the factors affecting perception of investors regarding investment in monthly income plans funds. He studied the relevance of various factors that influence investment decision of Mutual fund holders in Pune. The factors are liquidity, higher return and company reputation. A sample of 150 investors was surveyed through a pre-tested questionnaire. He concluded that most of the investors were aware of various investment options in mutual funds. He also concluded that most of the investors are aware of SIP funds and the reason for investing in them is continuous return given by these funds.

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As per Dr. S. Narayanrao (2003), Indian mutual Funds are able to satisfy investor’s expectations in bear market. Evaluation is carried out through relative performance index. Lakshmi, N (2007), evaluated the performance of mutual fund industry in India under the regulated environment after the introduction of the SEBI (Mutual Funds) Regulations 1996. He studied the relationship between the performances of market index with that of the growth schemes. He showed that the mutual fund industry had undergone a lot of mergers, acquisitions and closures besides the entry of many new mutual funds. There was an impressive growth in funds mobilized and had scaled upto Rs.10, 98,558 crores by the end of March 2006. Funds mobilized by the industry had grown by 57% and AUM by 14% during 1997-2006. Ms. M.V.Subha and Ms. Jaya Bharathi (2007) evaluated the performance of open ended mutual fund schemes by using various statistical measures like Sharpe ratio, Treynor ratio, and Jensen Differential measures. The period of study was from 1st Oct. 2004 to 30th Sept. 2005. The study revealed that performance of Mutual Funds during that period was satisfactory. Rizwan Ali et al. (2011) studied mutual funds’ performance of Pakistan, Conventional Vs Islamic. Both open-ended and close-ended mutual funds were considered. The period of study was from 2006 to 2008. They found that Worldwide there had been a tremendous growth in industry in both the size and maturity of many foreign capital markets. Vikas Kumar and Ankit Srivastava (2016) evaluated the performance of 20 open-ended equity schemes of private sector mutual funds. The period of study was from 1st April 2006 till 31st March 2015. The researchers analyzed the data with the help of all kinds of statistical tools. By comparing overall performance ranking of all schemes it could be seen that Reliance Pharma Fund had been the best. 3. OBJECTIVE OF THE STUDY The main objective of the present study is to understand the growth of mutual funds over the years and the reasons for growth of mutual funds. Why people choose mutual fund investments? How mutual fund industry is growing over the last ten years? Who are the major players in mutual fund? 4. SCOPE OF THE STUDY This article is limited to the growth of mutual funds and reasons for growth of mutual funds. Who are the major players in mutual funds and what the popular mutual funds are. This article is limited to Indian mutual fund industries only. 5. TYPES OF MUTUAL FUNDS  Small cap fund: In these types of funds, asset manager invest the money in stocks only. In these types of funds, asset manager invest in small cap companies. Their market capitalization range from US$300 million to US$ 2 billion.  Mid cap fund: In these types of funds, asset manager invest the money in stocks only. In these types of funds, asset manager invest in mid cap companies. Their market capitalization range from US$ 2 billion to US$ 10 billion.  Large cap fund: In these types of funds, asset manager invest the money in stocks only. In these types of funds, asset manager invest large cap companies. Their market capitalization range from more than US$ 10 billion.  Hybrid funds: In these types of funds, asset manager invest the money in stocks and equity.  Debt funds: These funds give fixed rate of interest. These are least risk and give low returns.  Liquid funds: These are the funds when customer wants to withdraw money immediately; these are the best funds.  Short term bond fund: These are open ended short term debt schemes that invest in instruments with maturity duration between one and three years.  Medium term bond funds: These are the funds that invest in fixed income markets, bonds that have maturity period range between five and ten years.  Long term bond funds: These are the one type of mutual funds which invest in bonds range between more than ten years and up to twenty years. 6. MUTUAL FUND COMPANIES IN INDIA In India, 44 asset management companies provide mutual fund solutions to customers. Now a day’s people are interested to invest their money in mutual funds. So many reasons are there for their interest. Now a day’s mutual fund

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companies create awareness about mutual fund benefits, how they have to invest, how they are working, what are the benefits of mutual funds. Mutual fund investments are very easy compare to shares. If we want to invest in shares, first of all, we have to open one demat account in bank. We have to choose one third party to buy shares. When the shares are available, at that time only we have to invest in shares. Fluctuations are more happened in shares. In case if company going into continues losses, sometimes they wind up the company. At that we lost our investment. Some times when we want to sell our shares, we have to wait for opposite party to buy our shares. How many days it will take we don’t know. We have to pay commission to third party, we have to pay some commission to account maintaining bank. Some time times we urgently require the money, at that time we have to sell our shares at some reduced price, compare to on that particular day market price of a share. But in mutual funds so many of the investment options are available for mutual fund investors and we have an interest to invest our money in equities; mutual fund companies invest their money in equities of the companies. We want to invest in small companies, mutual fund companies invest our money in small companies or middle level companies or large companies. If we are interested in regular fixed income, they invest our money in debt funds. In debt funds, short term, medium term, long term and liquid funds are there. 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. The AAUM of the industry stood Rs. 5.09 trillion on February 28, 2009, which means the Indian mutual fund industry has registered a more than 4 ½ fold increase in a period of 10 years. 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. To ease this process, we list out 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. In the last 10 years, India’s mutual fund industry has grown 12.5% annually on average, outperforming the growth clocked by the world and developed regions by more than double, according to a report by the Association of Mutual Funds of India (Amfi) and global analytics firm Crisil. During the same period, Asia-Pacific including India, grew at just 8%. Assets managed by the Indian MF industry grew to 23.96 trillion in July this year, up 17.33% from the previous year. “Around the same time last year, there was a rising equity market, low rates on traditional investment products like deposits, a high decibel investor awareness campaign from Amfi and a fine job from the retail distribution community in bringing investors through the SIP route, all of which contributed towards the growth of the industry," said Ajit Menon, executive director and chief business officer, DHFL Pramerica Asset Managers Pvt. Ltd. 7. MOST POPULAR MUTUAL FUND HOUSES IN INDIA Below is a list of the 10 most popular mutual fund houses in India on the basis of their total assets under management (AUM) as of Sep 18, 2019.

S. No. Name of Fund House AUM (in Crore)

1 HDFC Mutual Fund Rs. 3,42,525

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

3 SBI Mutual Fund Rs. 2,84,124

4 Aditya Birla Sun Life Mutual Fund Rs. 2,46,696

5 Reliance Mutual Fund Rs. 2,34,293

6 UTI Mutual Fund Rs. 1,59,694

7 Kotak Mahindra Mutual Fund Rs. 1,50,271

8 Franklin Templeton Mutual Fund Rs. 1,19,933

9 Axis Mutual Fund Rs. 89,768

10 DSP Mutual Fund Rs. 78,363 Source: https://www.paisabazaar.com/mutual-funds/mutual-funds-in-india/

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8. MOST POPULAR MUTUAL FUND SCHEMES IN INDIA The following is a list of the 10 most popular mutual funds in India based on their AUM as of Sep 18, 2019:

Name of Schemes AUM (in Crore) Type of Scheme 1 Year Return 3 Year Return 5 Year Return

HDFC Liquid Fund 87799.02 Debt 7.27% 7.00% 7.54%

ICICI Prudential Liquid Fund 68726.96 Debt 7.33% 7.08% 7.59%

Aditya Birla Sun Life Liquid Fund 61142.99 Debt 7.53% 7.18% 7.70%

HDFC Balanced Advantage Fund 42592.25 Hybrid -1.17% 7.70% 8.24%

ICICI Prudential Balanced Advantage Fund 29104.88 Hybrid 4.36% 8.14% 9.85%

SBI Equity Hybrid Fund 30028.1 Hybrid 1.92% 9.24% 11.43%

Kotak Standard Multicap Fund 26010.02 Equity -2.19% 8.85% 12.40%

Aditya Birla Sun Life Frontline Equity Fund 22001.9 Equity -4.91% 6.30% 9.14%

HDFC Mid Cap Opportunities Fund 22825.43 Equity -10.49% 4.90% 9.88%

HDFC Equity Fund 23230.66 Equity -5.95% 8.53% 8.17% Source: https://www.paisabazaar.com/mutual-funds/mutual-funds-in-india/ 9. GROWTH OF THE INDIAN MUTUAL FUND INDUSTRY The year 2018 was a turbulent year for the Indian stock markets. Foreign investors dumped Indian equities worth Rs 33,014 crore and debt instruments worth Rs 47,795 crore. In fact, they have continued to be net sellers in Indian stocks even in 2019. So far in January 2019, they have 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).

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10. 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. There are the investments are helpful to beat inflation. 3. Like bank recurring deposits, mutual funds offer systematic investment plan. We can start mutual funds even 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 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 nature within one to three days. 8. In mutual funds there is more diversification is there. 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 compare to bank fixed deposits. 10. Mutual funds offer some tax saving funds like equity linked savings scheme. These are the having 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. 11. CONCLUSION Recently mutual funds got so much popularity because of their uniqueness. They provide diversification facility of funds. Compare to bank fixed deposits, mutual funds offer high rate of return. These funds are managed by professionals. They provide tax saving facilities. Whenever investors want money, they can redeem their funds and get back their money. REFERENCES 1. Dr. Narayanasamy RVR (2013). Performance Evaluation of Equity Mutual Funds (On Selected Equity Large Cap Funds). International Journal of Business and Management Invention. pp.18-24 2. Michael C.Jensen (1968), "The performance of Mutual Funds in the period 1945-1964," Journal of Finance, Volume 23(2), pp. 389-416. 3. Panigrahi, M.S. (1996), "Mutual Funds : Growth, Performance and Prospects", Economic and Political Weekly, Volume 31(12), pp. 765-775. 4. Arnold L. Redman et al (2000)," The performance of global and International Mutual funds," Journal of Financial and Strategic Decisions, Volume 13(1), pp. 75-85. 5. Dr.S.Narayanrao. (2003). Performance evaluation of India mutual funds: National stock exchange in India. 6. Lakshmi, N., (2007), "Performance of the Indian Mutual Fund Industry: a study with special reference to growth schemes," Unpublished Ph.d. Thesis, Pondicherry University, Pondicherry. 7. M.V. Subha and Ms. S.Jaya Bharathi (2007),"An Empirical Study on the Performance of Select Mutual Fund Schemes India," Journal of Contemporary Researching Management, Vol. 1(1). 8. Dr. Vikas Kumar and Ankirt Srivastava (2016), "Performance Evaluation of Private Sector Mutual Funds", International Journal of Trend in Research of development, Volume 3(1), pp. 201-210. 9. https://www.paisabazaar.com/mutual-funds/mutual-funds-in-india/ 10. https://www.paisabazaar.com/mutual-funds/mutual-funds-in-india/,Asset 11. https://www.investopedia.com/investing/advantages-of-mutual-funds/ 12. https://www.franklintempleton.co.uk/investor/resources/investor-education/introduction-to-mutual-funds

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13. https://en.wikipedia.org/wiki/Mutual_fund 14. https://www.investor.gov/introduction-investing/basics/investment-products/mutual-funds-and-exchange- traded-funds-etfs 15. https://mpra.ub.uni-muenchen.de/83018/1/MPRA_paper_83018.pdf 16. https://www.researchgate.net/publication/292145404_Mutual_Funds_Industry_in_India_A_Growth_Trend_A nalysis 17. https://www.livemint.com/Money/SbfccvGsbAeyVBWKzoW2NJ/Indian-funds-beat-global-growth-pace-by- over-100.html 18. https://www.paisabazaar.com/mutual-funds/mutual-funds-in-india/

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