A Review on Evolution of Mutual Funds Market in India: Current Status and Problems

Abstract

The economic development of a country largely influenced either by credit based financing through financial institutions or by financial securities through capital market. Mutual Funds in recent past as a channel of resource mobilization has gained immense importance in general and in India in particular. India has much less exposure in the Mutual funds returns predictability literature until recently. Given India's fast-growing economic influence, research on this dimension as compared Indian stock market still seems to be inadequate and needs further investigation. The present study extends the existing literature. The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank of India. The history of mutual funds in India can be broadly divided into four distinct phases. The results from analysis suggests that resources mobilisation of UTI seems to be very high in 2009-10 while period of 2007-08 evidences that Private Sector mutual funds ranks top in the list of mutual fund mobilisation. A sharp decline in mobilization of funds was seen in 2008-09 due to Global Financial Crisis. All the problems of mutual fund industry can be classified in the following categories: Problems related to structure, Problems related to the investors, Problems related to working, Problems related to performance. The mutual funds are bound to invest the funds as per their investment objectives of each scheme published in the offer document. After the issue is over, it becomes the mandate and the mutual funds have no choice to invest the funds in other securities, which can provide higher returns. The greater transparency, increased innovations, better services to the investors, liquidity and higher returns will make mutual fund schemes more popular and investors friendly.