Chapter 16 - Mutual Funds

Mutual funds

Well, now we have so far discussed about equities in general in our last three modules. In this module, we shall discuss about mutual funds and derivatives trading in both equity as well as commodities. So first, let’s zero in on mutual funds. You probably have come across the term mutual fund very often in the past. It is gaining momentum fast as an investment option. Mutual funds are an investment that allows a group of investors to pool their money and hire a portfolio manager. The manager invests this money (the fund’s assets) in stocks, bonds or other investment securities (or a combination of stocks, bonds and securities). In India since 1993 private sector and foreign institutions were permitted to set up mutual funds. And after that, we have seen a tremendous growth in mutual funds in India. As on March 2010, the Indian mutual fund industry has 40 players. The number of public sector players has reduced from 11 to 5. The public sector has gradually receded into the background, passing on a large chunk of market share to private sector players. Mutual fund assets under Management (AUMs) in India has grown to Rs 7,945 billion by December 2009 and is expected to grow annually at 22-25% till 2015. The average of AUMs in February was marginally up by 2.6 per cent to Rs 7.8 lakh crore from Rs 7.61 lakh crore on a month-on-month basis. Indian MF industry offers a plethora of schemes and serves broadly all type of investors. The range of products includes equity funds, debt, liquid, gilt and balanced funds. There are also funds meant exclusively for young and old, small and large investors. Let’s discuss it further.