Detailed Project On Mutual Funds PDF

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Mutual Funds

Introduction:

Mutual Funds is a topic that is of huge interest not only to researchers all over the world but also to investors.

Mutual funds as a medium-to-long-term investment option are preferred as a suitable investment option by investors.

The Mutual fund industry in India has appeared as a leading financial intermediary in the Indian capital market.

As of April 2006, the industry comprising 33 Asset Management Companies managed financial assets of over Rs.2000 billion (equivalent to US $45 billion) contributed by an estimated 20 million investors spread all over the country.

The majority of the funds (approximately) 96% of the funds are open-ended type and the remaining 4% of the funds are close-ended type.

The assets have grown at a compounded annualized growth rate of 48 percent over a period of four decades, 1965 – 2005, which is evidence of the growing popularity of mutual funds in the country (as per the figures made available by the Association of Mutual Funds in India).

The impressive growth can be attributed to the entry of commercial banks and private players in the mutual fund industry coupled with the rapid growth of the Indian capital markets during the last couple of years.

The main objective of investing in a mutual fund scheme is to diversify risk.

Though mutual funds invest in a diversified portfolio, the fund managers take different levels of risk in order to achieve the scheme’s objectives.

In India, the mutual fund concept began in the 60s for a more active mobilization of household savings to provide investible funds to the industry.

The idea of the first mutual fund in India was born out of the far-sighted vision of Sri T.Krishnamachari, the then finance minister.

He wrote to the then-prime minister, Pandit Nehru outlining the need for an institution that would serve as the conduit for these resources to the Indian capital market.

In July 1964, the concept of mutual funds took root in India when Unit Trust of India was set up with the twin objectives of mobilizing household savings and investing funds in the capital market for industrial growth.

The household sector accounted for about 80 percent of the nation’s savings and only about one-third of such savings were available to the corporate sector.

The objective was that UTI could be used as an effective vehicle for channelizing progressively larger share of household savings to productive investments in the corporate sector.

In 1964, UTI came up with the first mutual fund Unit Scheme, 1964, popularly known as US 64 which was the first open-ended balanced fund.

The UTI is a public sector enterprise that was created in 1964 under the unit trust of India Act, 1963 passed by the Parliament.

Under the provision of the Act, UTI acted as a financial intermediary for the purpose of mobilizing savings through the sale of units of the UTI and for investing those funds primarily in blue chip corporate securities.

UTI was the only organization that has diversified open-ended and close-ended schemes under its management of any other public investment company in India.

The impressive growth of mutual funds in India has attracted the awareness of Indian researchers, individuals, and institutional investors during the past ten years.

A number of studies have been conducted to examine the growth, competition, performance, and regulation of mutual funds in India.

The Indian mutual fund industry is currently in the phase of consolidation and growth stage of the product life cycle.

The Indian mutual fund industry is no exception and the competition would intensify in the coming years as it happened in other industries.

In view of the above discussion, the present paper tries to analyze the problem faced by Unit Trust of India(UTI), the first and oldest mutual fund in India, especially its largest unit scheme-US 64 during recent times and evaluate the overall current performance in terms of fund mobilization, profitability, dividend distribution, investible funds, redemption and a net inflow of funds.

Author
Language English
No. of Pages15
PDF Size0.4 MB
CategoryProject Report
Source/Creditscore.ac.uk

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