An Overview Of Indian Mutual Funds

Mutual Funds have gained a lot of popularity over the last few years. People favor MFs to bank deposits, life insurance and even bonds for the reason that with a little money, they can get into the investment game. Moreover, the generally accepted goals of the small investors - the protection of principal, the maintenance of income and appreciation of principal are achieved when their savings are invested in MFs. One can possess a string of blue chips like ITC, TISCO, Reliance etc., through them.

MFs basically act as an intermediary between the investor and capital markets. The business of MF is to re-invest in any scrip in the market, and prove their performance through returns to investors. Hence, they are useful in spreading risks and optimizing returns.

History of Mutual Funds

The formal origin of MFs can be traced to Belgium where Society Generale de Belgique, was established in 1822 as an investment company to finance investments in national industries with high associated risks. But the real credit of introducing the modern day concept of MFs goes to the Foreign and Colonial Government Trust of London established in 1868.

The idea of MFs in India was born out of the far-sighted vision of Sri T. Krishnamachari, the then Finance Minister. MFs began to take shape in India with the establishment of Unit Trust of India (UTI) in the year 1963. UTI had twin objectives of mobilizing household savings and investing the funds in the capital market for industrial growth. The first scheme launched by UTI was Unit-64.

The year 1987 marked the entry of non-UTI, public sector MFs. SBI MF was the first non-UTI MF established in 1987.

In the year 1993, the MF industry was opened to the private domestic and foreign players. The Modis, Birlas, Mahindras, Tatas, among others jumped on to the fund wagon. Other players like Jardine Fleming, George Soros, and Capital International also joined the party and the number of MF houses went on increasing. The Kothari Pioneer MF (now merged with Franklin Templeton) was the first private sector MF registered in July 1993.

The second half of the 1990s saw the commencement of numerous new types of schemes in India, particularly by the private sector funds. UTI In 1994 launched the First retirement benefit plan, and Kothari Pioneer MF (KMPF) launched the first pension plan in 1996. During 1997-2000, several gilt funds, government securities funds and liquid funds were launched.

SEBI notified regulations for the MFs in 1993 under which all MFs (except UTI) were to be registered and governed. The regulations were fully revised in 1996 and have been amended thereafter from time to time to protect the interests of investors.