Mutual Fund - Indian Market Scenario
Posted Date: 13-Feb-2009
Pradip Ranjan Sinha
Market of Mutual Funds
Mutual funds – it is the pool of money, collected from investors, and is invested according to the certain investment objectives.
Types of mutual funds
1.By structure: -
Open ended funds
Close ended fund
2.By investment objective: -
Money market funds
Low load funds
3.Other schemes: -
Industry specific schemes
Important characteristics of mutual funds: -
1. It belongs to the investors
2. It is managed by investment professionals
3. It is invested in a portfolio of marketable investments
4. The investors share in fund is denominated by unit’s
5. The investment portfolio is created according to the stated investment objective
Advantages of mutual funds: -
Reduction in risk
Reduction of transaction cost
Convenience and flexibility
Easy to buy and sell
Limitations of mutual funds: -
1. Subject to market risks
2. No assurance or guarantee of return
3. The NAV of the units can fluctuate a lot
4. Past performance does not indicate future performance
5. The sponsors are not responsible for any loss
6. Investors are not been offered any guaranteed returns
Marketing strategies adopted by the mutual funds.
1.Direct marketing: -
Advertising in newspapers and magazines
Hoardings and banners
2.Selling through intermediaries:-
Regular meetings with distributors.
Meetings with HNI’s.
Emerging trends and innovations in mutual funds
1. Systematic investment plan.
2. Systematic withdrawal plan.
Findings of the Study
1. The Indian investor is highly risk averse.
2. He looks for safety and reasonable returns.
3. He understands more by emotions and sentiments than by a quantitative comparison.
4. The typical Indian investor looks for the safety of funds, reasonable returns and liquidity.
5. He will be happy if assured a rate of reasonable return on his investment.
6. They don’t have the right knowledge of market i.e., entry & exit time.
7. They don’t have the latest information & technical expertise of timing the market.
8. They need to be educated regarding various investment avenues available to them &the risk & returns associated with them.
1. Expansion of the market for various investment instruments is needed.
2. Create awareness among investors regarding the benefits of investing in mutual fund.
3. Small cities should be targeted for the awareness programmes & promotional activities.
4. Today’s investors need technical advice from experts, timely delivery of documents cheques etc.
5. The AMC,s should be positioned as financial advisors ¬ mere as investment companies.
6. The perception of investors regarding mutual funds needs to be changed.
Check List To Help Extract The Most From Mutual Funds
1. Draw up your asset allocation.
2. Identify funds that fall into your buy list.
3. Read the offer document carefully.
4. Match your investment objectives.
5. Checkout past performance.
6. Think hard about investing in sector funds.
7. Does the funds change funds manager often
8. Customer size.
9. Monitor regularly and review.
10. Don’t rush in picking funds, think first.
11. Don’t put all your eggs in one basket.
12. Keep track of your investment.
13. Know when to sell your mutual funds.
1. Saving is an integral part of every individual.
2. The investors looks for three basic things, they are – growth of funds invested, liquidity, tax benefits, and safety
3. Mutual funds satisfies all the above investors needs.
4. The future of Indian mutual fund market depends to the large extent on the various initiatives taken and the policies framed by the govt and the regulators towards the development of this market, but one thing is sure that in future mutual funds are here to stay, sustain and grow.
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