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

Volume 118 No. 18 2018, 4357-4371 ISSN: 1311-8080 (printed version); ISSN: 1314-3395 (on-line version) url: http://www.ijpam.eu 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

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, 2003. 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 1987. Public sector banks were allowed to establish mutual funds in 1987. 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.592250 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

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

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 2004-05 to 2013-14. 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) 1 2 3 4 5 6 1974-75 0.17 - - - 0.17 1975-76 0.29 - - - 0.29 1976-77 0.35 - - - 0.35 1977-78 0.73 - - - 0.73 1978-79 1.02 - - - 1.02 1979-80 0.58 - - - 0.58 1980-81 0.52 - - - 0.52 1981-82 1.57 - - - 1.57 1982-83 1.67 - - - 1.67 1983-84 3.30 - - - 3.30 1984-85 7.56 - - - 7.56 1985-86 8.92 - - - 8.92 1986-87 12.61 - - - 12.61 1987-88 20.59 2.50 - - 23.09 1988-89 38.55 3.20 - - 41.75 61 4360

1989-90 55.84 8.89 3.15-67.88 1990-91 45.53 23.52 6.04-75.09 1991-92 86.85 21.40 4.28-112.53 1992-93 110.57 12.04 7.60-130.21 1993-94 92.97 1.48 2.38 15.60 112.43 1994-95 86.11 7.66 5.76 13.22 112.75 1995-96 -63.14 1.13 2.35 1.33-58.33 1996-97 -30.43 0.07 1.37 8.64-20.35 1997-98 28.75 2.37 2.04 7.49 40.65 1998-99 1.70-0.89 5.47 20.67 26.95 1999-00 45.48 3.36 2.96 169.38 221.18 2000-01 3.22 2.49 12.73 92.92 111.36 2001-02 -72.84 8.63 4.06 161.34 101.19 2002-03 -94.34 10.33 8.61 121.22 45.82 2003-04 10.50 45.26 7.87 415.10 478.73 2004-05 -24.67 7.06-33.84 79.33 27.88 2005-06 34.24 53.65 21.12 415.81 524.82 2006-07 73.26 30.33 42.26 794.77 940.62 2007-08 106.78 75.97 21.78 1382.24 1586.77 2008-09 -41.12 44.89 59.54-305.38-242.08 2009-10 156.53 98.55 48.71 479.68 783.47 2010-11 -166.36 13.04-169.88-162.81-486.00 2011-12 -31.79 3.89-30.98-395.25-454.13 2012-13 39.38 72.32 13.12 624.57 749.38 2013-14 4.01 48.44 25.72 467.90 546.07 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 1970-71 to 1990-91 for UTI relate to July-June period. Data for the year 1996-97 excludes re-investment sales. Data for net sales at face value (excluding premium) during 1993-94, 1994-95, 1996-97, 1997-98, 1998-99, 1999-2000,2000-01 and 2001-02 are ` 74.53 billion, ` 68 billion, ` 28.77 billion, ` 8.55 billion, ` 25.92 billion, ` 13 billion, ` 57.62 billion, ` 12.01 billion and ` 61.19 billion, respectively. Data for UTI for 2003-04 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 2004-05 onwards) pertain to UTI Mutual 4361

Fund only. Data for 2013-14 are provisional. Assets Under Management (year ended 31 st March) (Institution wise) Public Sector 2011 2004 2005 2006 2007 2008 2009 2010 * 2012 2013 2014 A. Bank Sponsored - - - - - - - - - - Joint Venture 2808 1318 1680 2866 2614 4400 4949 5108 6797 7683 Predominately Indian 5 6595 6 7 9 6 7 6 2 8 6-20.1 - - - - - - - - - - 2 4.41 5.69 5.15 5.68 6.27 7.17 7.06 7.68 8.32 8.48 612 2077 2585 4191 7303 8106 Joint Venture (0.1 (0.3 (0.3 (0.6 (0.8 (0.8 Predominately Foreign - - - - 5) 4) 7) 3) 9) 9) 2250 3193 3776 4847 3780 6645 7071 6440 7569 8016 Others 8 3 3 8 1 1 7 4 9 2 - - - - - 15.0 13.7 11.5 - - 10.8 10.0 - - - - 5 7 7 9.59 9.06 2 8 9.68 9.27 8.86 B. Institutions Joint Venture 1238 1782 2510 1191 1075 Predominately Indian 6539 3010 5229 9643 4 5 5 5 5799 7185 2 - - - - - - - - - - - 4.68 2.01 2.26 2.95 2.45 4.27 4.09 1.69 0.87 0.88 1.19 4362

C. Private Sector 1988 3075 5060 8015 1527 1301 1869 2410 1905 2296 2292 Indian 5 0 2 7 95 48 80 48 84 49 55 - - - - - - - - - - - 14.2 20.5 21.8 24.5 30.2 31.1 30.4 34.3 28.6 28.1 25.3 4 5 2 6 5 9 5 7 6 2 3 3029 3129 4534 5467 5769 5724 5893 3633 4 0 7 9 3 7 8 Foreign - - - - - - - -2.6 - - - 5.99 7.49 7.39 7.79 8.67 7.01 6.51 Joint Venture Predominately Indian 3314 3088 7414 1047 1612 1532 2252 2540 2744 3439 4124 3 5 4 79 73 62 48 45 87 43 66 - - - - - - - - - - 23.7 20.6 31.9-31.9 36.7 36.6 36.2 41.2 42.1 45.5 4 5 7 32.1 3 3 9 3 8 2 7 Joint Venture 4833 5585 5676 7723 7125 2021 1876 1677 1655 2765 2860 Predominately Foreign 1 2 8 9 9 6 4 3 2 3 5 - - - - - 34.6 37.3 24.4 23.6 14.1 - - - - - - 2 3 8 6 1 4.84 3.05 2.39 2.48 3.38 3.16 Total 1396 1496 2318 3263 5051 4173 6139 7012 6647 8166 9051 16 00 62 88 52 00 79 58 92 57 20 Source :AMFI quarterly and Monthly Reports Figures in Brackets are Percentages.* Include Rs. 612 crore related to joint venture predominantly foreign 4363

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 0.975825 1 Institutions 0.968554 0.895858 1 Others 0.997021 0.96145 0.979434 1 Figure 500000 Asset Under Management Institutional Wise (Private Sector) 400000 300000 200000 100000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Indi a Joint Venture Predominately Indian Foreign Joint Venture Predominately Foreign 4364

Table - Correlation between different institutions of private sectors Joint Venture Joint Venture Predominately Predominately India Foreign Indian Foreign India 1 Foreign 0.962438 1 Joint Venture Predominately Indian 0.93367 0.927372 1 Joint Venture Predominately Foreign -0.66141-0.59161-0.6205 1 Assets Under Management : (Institution Wise) Table shows sector-wise Assets Under Management from March 2004 to March 2014. 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 0.975825. 4365

Sector-wise Mobilization of Resources by Mutual Funds and the Number of schemes. Schem 2008- es 2004-05 2005-06 2006-07 2007-08 09 2009-10 2010-11 2011-12 2012-13 2013-14 Incom e/debt 100813 183966 431726 538336 6,754,11 721357 Sales 798674 1 9 3 7 9944693 8,777,034 3 8 9710063 Orient 177560 421339 541552 6,779,76 712339 ed Redemptio n 803918 991510 1 6 8 9863485 8,817,377 6 5 9646423 Schem e Net -5244 16621 64068 103867-32161 81208-40,343-25,653 90183 63640 Growt h/equi ty oriente Sales 37233 86021 94351 126286 32805 64715 66,592 50,619 43364 46093 Redemptio n 30180 50793 66146 79353 28781 62566 79,730 50,498 57951 55361 d Schem e Net 7053 35228 28205 46933 4024 2149-13,138 121-14587 -9268 Sales 3755 4006 4473 11488 2695 4693 7,490 5,027 5205 3435 Balanc ed Schem es Redemptio n 3410 3079 2762 5720 2635 5386 6,146 4,645 4989 5421 Net 345 927 1711 5768 60-693 1,345 382 216-1986 Excha Sales - - 99 9339 5719 3535 7,709 8,563 5052 6869 4366

nge Trade d Fund Redemptio n - - 3 12106 6717 2751 4,072 5,540 3851 6273 4367

Net - - 96-2767 -998 784 3,637 3,024 1201 596 Funds of Funds Sales - - - - 1767 1387 689 1,356 686 1941 Investi ng Redemptio n - - - - 989 1754 1,596 1,254 1160 840 Overse as Net - - - - 778-367 -907 102-474 1101 109815 193859 446437 542635 1001902 6,819,67 726788 Sales 839662 8 2 6 3 3 8,859,515 9 5 9768401 Total 104538 184451 431057 545465 6,841,70 719134 Redemptio n 837508 2 2 5 0 9935942 8,908,921 2 6 9714318 Net 2154 52776 94080 153801-28297 83081-49,406-22,024 76539 54083 Correlation between UTI schemes and UTI Amounts 0.123275. Correlation between other than UTI Schemes and other than UTI Amount 0.675463. Correlation between private sector schemes and private sector amounts 0.912474 @ 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

Table - Correlation Values between schemes Other than UTI UTI Private UTI 1 Other than UTI 0.403650343 1 Private 0.22782427 0.860876607 1 TABLE -ANOVA Source of Variation SS Df MS F F crit Between Groups 319249.7 2 159624.9 8.134536 3.238096 Within Groups 765301.1 39 19623.1 Total 1084551 41 4369

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 2004-05 and 2013-14. 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 2004-2005 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 2013-2014. 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 (8.134536) is greater than the table value of F (3.238096). 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 2014. 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 2004-2005 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 2013-2014. 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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