GROWTH OF RESOURCE MOBILISATION BY INDIAN MUTUAL FUND INDUSTRY: AN EMPIRICALANALYSIS

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1 Volume 118 No , ISSN: (printed version); ISSN: (on-line version) url: ijpam.eu GROWTH OF RESOURCE MOBILISATION BY INDIAN MUTUAL FUND INDUSTRY: AN EMPIRICALANALYSIS 1 M.Venkateswara Rao 1 Professor, Sarada Institute of Technology and Management, Vijayawada ABSTRACT Mutual funds play a vital role in resource mobilization and its efficient allocation to the productive sources of the economic system. In this process of development, mutual funds have emerged as strong financial intermediaries and are playing an important role in bringing stability to the financial system and efficiency to the resource allocation process. Mutual fund industry today is one of the most preferred investment avenues in India. Mutual funds increase the mobilization of investable funds of the society by pooling the interest of a great number of small savers towards the financial system of the country. Resource mobilization means the movement of money or money equals from the non or less productive section to the productive section. Mutual fund industry in India is a fast growing industry is regulated by the Securities and Exchange Board of India (SEBI). Today there are around 45 mutual funds industry participated and over 1823 schemes with total assets under management around Rs. 49,55,335crores and also total resource mobilized by mutual funds industry is Rs. 5,85,01,279 crores. In the present study an attempt have been made to know the net resource mobilization of funds, Institution-wise assets under management, sector-wise resource mobilized by mutual fund industry. Keywords: Funds Mobilized, Assets Under Management (AUM), Resource Mobilized Schemes,Public Sector, Private Sector, UTI Mutual Fund. 1.INTRODUCTION The Mutual Fund Industry in India was started with a humble beginning by establishing the Unit Trust of India in the year 1963, by the Government of India. The main aim of the UTI was to enable the common investors to participate in the prosperity of capital market through portfolio management aimed at reasonable return, liquidity and safety and to contribute to India s industrial development by channelising household savings into corporate investment 1. By the year 1993, UTI occupied nearly 80 per cent of the market share and developed manifold in terms of number of investors, investable funds, reserves with wide marketing network and efficient leadership 2. Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with the objectives as disclosed in offer document. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the 4357

2 public. Thus mutual funds make saving and investing simple, accessible and affordable. The advantages of mutual funds include professional management, diversification, variety, liquidity, affordability, convenience, ease of recordkeeping, strict government regulation and full disclosures. The Chartered Financial Analyst had commented that, Mutual Funds today form 1/10 th of the banking industry s size. If we compare this an indication in the current interest rate scenario, Mutual Fund has ample shelf-space to grow into an industry like the banking industry in India. 2.REVIEW OF LITERATURE: 1. The study of OP Gupta and Amitabh Gupta aims at evaluating the investment performance of select Indian mutual fund schemes during the four years period from April 1, 1999 to March 31, The result indicates mixed performance of sample funds during the study period. There is no conclusive evidence, which suggests that performance of Indian mutual funds is superior to the market. However, there is some evidence that some of the funds are performing better than the market. Further, they found that the sample funds are not adequately diversified. 2. Parihar, Sharma and Singh(2009) revealed that mutual funds are financial Intermediaries concerned with mobilizing savings of those who have surplus and the canalization of these savings in those avenues where there is a demand for funds. 3. Vaikunthe and Salimath(2011) in their article on Mutual Funds: The Challenges and Issues have discussed AMCs need to re-orient their business towards fulfilling customer needs. As customers seek trusted advisor, the manufacture-distributor-customer relationship is expected to be centered not on the sale of product, but for collectively promoting the financial success of customers across all facets of their professional and personal lives. 4. This requires creating a collaborative network of experts in funds management and financial advice, innovative product offerings, efficient service delivery and supporting technology. 5. Usha Rekha(2012)has taken initiative to study on Growth of Indian Mutual Fund Industry-A Review discussed about the history of mutual funds in India, the mutual fund industry started with the setting up of Unit Trust of India (UTI) in 1964, enjoyed the monopoly power up to Public sector banks were allowed to establish mutual funds in Since 1993, private sector and foreign institutions were permitted to set up mutualfunds. By the end of march 2011 there are 41 fund houses under 1131 schemes with managed assets of Rs Cr. 6. Narasimhan(2013) in their article on Mutual Funds: A Change in Indian Investment Perspective he discussed mutual funds have a new mantra for Indian investors. Mutual funds market plays a predominant role on par with other investment instrument. There has been a tremendous shift from traditional investment avenues like N.S.C. and P.P.F. etc, to mutual funds and this trend is rapidly increasing day-by-day. He conclude that mutual funds play an important role in supporting the capital market, which is quite essential for supporting a growing economy like India and also plays a leading role in the development of secondary securities market. 4358

3 Concept of Mutual Fund: Objectives of the study: The following are the specific objectives of the present study. 1. To analyse the net resource mobilisation by mutual fund industry. 2. To analyse the institution-wise asset under management of mutual fund industry. 3. To analyse the sector-wise resource mobilisation by mutual fund industry. 3.METHODOLOGY AND DATA COLLECTION: The present study is based on secondary data. The data required for the study has been collected from the books, magazines, various annual reports of Securities Exchange Board of India (SEBI), hand book of statistics on Indian securities market, Association of Mutual Fund in India (AMFI) and various websites of the mutual fund companies etc. 4359

4 Period of the study: In the present study an attempt is made to analyse total resource mobilisation by the mutual fund industry in India for the past ten years period i.e. from to Tools and techniques used: For the present study data drawn from various sources are analyzed with help of statistical tools such as averages, percentages are used. The data has been presented mainly in tabular form to make it understandable easily. NET RESOURCES MOBILISED BY MUTUAL FUNDS Year UTI (` Billion) Banksponsored FI-sponsored Private sector Total mutual funds mutual funds mutual funds (2 to 5)

5 Source :UTI and Respective Mutual Funds. The above data shows that resource mobilisation by mutual fund industry in India. Under mobilisation of funds includes total funds mobilised by public sector, private sector and UTI mutual fund companies. For Unit Trust of India (UTI), data are gross values (with premium) of net sales under all domestic schemes. Data from to for UTI relate to July-June period. Data for the year excludes re-investment sales. Data for net sales at face value (excluding premium) during , , , , , , and are ` billion, ` 68 billion, ` billion, ` 8.55 billion, ` billion, ` 13 billion, ` billion, ` billion and ` billion, respectively. Data for UTI for relates to UTI Mutual Fund for the period from February 01, 2003 to March 31, 2004, being the first year in operation after the bifurcation of the erstwhile UTI into UTI Mutual Fund and Specified Undertaking of the Unit Trust of India. Subsequent annual data (from onwards) pertain to UTI Mutual 4361

6 Fund only. Data for are provisional. Assets Under Management (year ended 31 st March) (Institution wise) Public Sector * A. Bank Sponsored Joint Venture Predominately Indian Joint Venture (0.1 (0.3 (0.3 (0.6 (0.8 (0.8 Predominately Foreign ) 4) 7) 3) 9) 9) Others B. Institutions Joint Venture Predominately Indian

7 C. Private Sector Indian Foreign Joint Venture Predominately Indian Joint Venture Predominately Foreign Total Source :AMFI quarterly and Monthly Reports Figures in Brackets are Percentages.* Include Rs. 612 crore related to joint venture predominantly foreign 4363

8 Table - Correlation between different institutions of Public sector Joint Venture Joint Venture Predominately Predominately Indian Foreign Institutions Others Joint Venture Predominately Indian 1 Joint Venture Predominately Foreign Institutions Others Figure Asset Under Management Institutional Wise (Private Sector) Indi a Joint Venture Predominately Indian Foreign Joint Venture Predominately Foreign 4364

9 Table - Correlation between different institutions of private sectors Joint Venture Joint Venture Predominately Predominately India Foreign Indian Foreign India 1 Foreign Joint Venture Predominately Indian Joint Venture Predominately Foreign Assets Under Management : (Institution Wise) Table shows sector-wise Assets Under Management from March 2004 to March After deregulation, share of Indian mutual fund companies, Joint venture predominantly Indian companies related to private sector have increased their asset base manifold. The above analysis reveals that the share of Indian mutual fund companies, Joint venture predominantly Indian companies had increased their asset base manifold. On the other hand, assets of bank sponsored mutual funds have decreased. Joint venture mutual funds predominantly foreign though increased are lagging behind when compared to the Indian and predominantly Indian mutual funds. This is evident by the correlation analysis. The correlation analysis between joint venture predominantly Indian and other categories in the case of public sector, and the correlation analysis between Indian and Joint venture predominantly foreign in the case of private sector is positive. Correlation between Joint venture predominantly Indian and Joint venture predominantly foreign is positive and significant because it is

10 Sector-wise Mobilization of Resources by Mutual Funds and the Number of schemes. Schem es Incom e/debt ,754, Sales ,777, Orient ,779, ed Redemptio n ,817, Schem e Net ,343-25, Growt h/equi ty oriente Sales ,592 50, Redemptio n ,730 50, d Schem e Net , Sales ,490 5, Balanc ed Schem es Redemptio n ,146 4, Net , Excha Sales ,709 8,

11 nge Trade d Fund Redemptio n ,072 5,

12 Net ,637 3, Funds of Funds Sales , Investi ng Redemptio n ,596 1, Overse as Net ,819, Sales ,859, Total ,841, Redemptio n ,908, Net ,406-22, Correlation between UTI schemes and UTI Amounts Correlation between other than UTI Schemes and other than UTI Amount Correlation between private sector schemes and private sector amounts Net sales value with premium under all domestic schemes P-provisional Source: RBI Report on currency and finance, RBI Annual Report, Supplement to RBIBulletin, Various issues. Value Research, Mutual Fund Insight, various issues. 4368

13 Table - Correlation Values between schemes Other than UTI UTI Private UTI 1 Other than UTI Private TABLE -ANOVA Source of Variation SS Df MS F F crit Between Groups Within Groups Total

14 Sector-wise Resources mobilization of Mutual Funds and the number of Schemes: Table reveals sector-wise mobilization of resources by mutual funds and their schemes during and The share of Public Sector in terms of the number of schemes and the volume of funds have been gradually occupied by the private sector after deregulation. Therefore, from the above analysis, it is clear that the share of public sector in terms of number of schemes and funds mobilization 70 per cent and 88 per cent respectively in had been gradually occupied by the private sector after deregulation of the mutual fund industry and reached to 15 per cent and 13 per cent respectively by the year It is also evident from the correlation analysis. The correlation between the resources mobilized and the number of schemes of private sector is highly positive, which shows that there is an increase in the resources mobilized with the increase in number of schemes. The negative correlation between the number of schemes and resource mobilization of UTI shows that though the number of schemes increased there was a decline in resource mobilization. And the correlation between the number of schemes of both UTI and private sector is highly positive. The calculated value of F ( ) is greater than the table value of F ( ). Hence it is also concluded that there is a significant difference between the number of schemes and resource mobilization. 4.CONCLUSION Resource mobilisation by mutual fund industry includes total funds mobilised by public sector, private sector and UTI mutual fund companies. For Unit Trust of India (UTI), data are gross values (with premium) of net sales under all domestic schemes, sector-wise Assets Under Management from March 2004 to March After deregulation, share of Indian mutual fund companies, Joint venture predominantly Indian companies related to private sector have increased their asset base manifold. the share of public sector in terms of number of schemes and funds mobilization 70 per cent and 88 per cent respectively in had been gradually occupied by the private sector after deregulation of the mutual fund industry and reached to 15 per cent and 13 per cent respectively by the year REFERENCES [1] Agarwal, Sanjiv., (2000) Bharat s Guide to Indian Capital Market, Bharat Law House, New Delhi. [2] Avadhani V.A., (2005) Investment and Securities Markets in India, Himalaya Publishing House, Mumbai. [3] anardhana Rao, N., (2004) Financial Markets Emerging Scenario, The ICFAI University Press, Hyderabad. [4] Investment Company Institute (2006) Mutual Funds Fact Book; Industry Trend andstatistics, Washington. [5] Hirsch, M., (1992) The Mutual Fund Wealth Builder; A Mutual Fund Strategy thatwon t letyou down, Harper and Row, New York. [6] ICSSR (1995) A survey of research in Economics, Allied Publications. 4370

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