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When we ask for investment advice these days, the first thing that comes to mind is mutual funds. People say mutual funds are good investments, but what exactly are they and why are MFs a good investment option?
A mutual fund is a type of investment vehicle that pools the money of many investors and invests it in stocks, bonds, money market instruments, and other types of securities. An investor can gain access to markets that would otherwise be inaccessible to them by investing in a mutual fund, as well as take advantage of the professional fund management services provided by asset management firms.
Mutual funds, in layman’s terms, are similar to baskets. Each basket contains specific types of stocks, bonds, or a mix of stocks and bonds that are combined to form a mutual fund portfolio.
At the initiative of the Indian government and the Reserve Bank of India, the Unit Trust of India was formed in 1963. It is possible to divide the history of mutual funds in India into four distinct phases.
1964-1987 – First phase
Parliament passed a law in 1963 establishing the Unit Trust of India (UTI). As a result, it was under the administrative control of Reserve Bank of India. In 1978, there was a revolution in
Unit Scheme 1964 was the first scheme launched by UTI. UTI had Rs. 6,700 crores in assets under management at the end of 1988.
The Second Phase lasted from 1987 to 1993. (Entry of Public Sector Funds)
In June 1987, SBI Mutual Fund became the first non-UTI Mutual Fund, followed by Canbank Mutual Fund in December 1987, Punjab National Bank Mutual Fund in August 1989, Indian Bank Mutual Fund in November 1989, Bank of India in June 1990, and Bank of Baroda Mutual Fund in November 1990. (Oct 92). GIC launched its mutual fund in December 1990, while LIC launched its mutual fund in June 1989.
The third phase lasted from 1993 to 2003. (Entry of Private Sector Funds)
With the introduction of private sector funds in 1993, a new era in the Indian mutual fund industry began, providing Indian investors with a broader range of fund families. In addition, the first Mutual Fund Regulations were enacted in 1993, under which all mutual funds, except UTI, were to be registered and governed. In July 1993, the former Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund to be registered.
Mutual Fund Regulations were revised and expanded in 1996, replacing the SEBI (Mutual Fund) regulations of 1993. SEBI (Mutual Fund) Regulations 1996 governs the industry.
Several mergers and acquisitions have taken place in the mutual fund industry, as the number of mutual fund houses continues to grow. A total of 1,21,805 crores was invested in 33 mutual funds as of the end of January 2003. Assets under management of Rs. 44,541 crores put the Unit Trust of India (UTI) way ahead of other mutual funds.
Since February 2003, the fourth phase has been in effect.
A year after the Unit Trust of India Act 1963 was repealed in February 2003, UTI was split into two separate entities. At the end of January 2003, the Unit Trust of India had Rs 29,835 crores in assets under management, which accounted for the assets of US 64 scheme, assured return and other schemes. There are no mutual fund regulations that apply to the Unit Trust of India, which operates under an administrator and according to rules framed by the Government of India.
The UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC, is the second fund in the series. Registered with SEBI and operating under the Mutual Fund Regulations, it is governed by the Mutual Fund Act.
Mutual fund industry has entered its current phase of consolidation and growth with the bifurcation of erstwhile UTI, which had 76,000 crores of assets under management in March 2000, and the establishment of a UTI Mutual Fund, compliant with the SEBI Mutual Fund Regulations, as well as recent mergers among different private sector funds.
Mutual funds have made significant contributions to the growth of the Indian economy. With the entry of MFs, the Indian financial markets have seen a significant increase. It has had a significant and positive impact on our economy in the following ways:
Mutual Funds in India are available for investment.
Among the residents are:
Indians who live in the United States
Indian Corporations
Trusts / Charitable Institutions in India
Banks
Non-Banking Financial Institutions
Companies that provide insurance
Provisional Funds
Non-Residents include
non-resident Indians and
other corporate bodies registered with SEBI,
such as Foreign Institutional Investors (FIIs).
However, certain types of investors are not permitted to invest in specific schemes of certain funds. Furthermore, investors who are eligible to invest may be required to follow additional procedures.
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