INDEX

TOPIC Mutual Fund- Overview Structure of Mutual fund Indian Mutual Fund Industry Types of Mutual funds schemes Names of some Mutual Fund Benefits of Mutual Fund Phases of Mutual Fund industry in India Phase I Phase- II Phase- III Phase- IV Phase- V Phase- VI Conclusion Bibliography 3

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4 4-5 5-8 10 10-11 12 13 14 15 15 16 19 20

MUTUAL FUND
A mutual fund is a professionally managed type of collective investment schemes that pools money from many investors to buy stock, bonds, short term money market instruments or other securities. It performs a basic function of buying and selling securities on behalf of its unit holders. The income earned through these investment schemes are shared by its unit in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. It is a pure intermediary and the term mutual fund means that investors contribute to the pool, and also benefit from the pool.

Many investors with common financial objectives pool their money.

The money collected from investors are invested into shares , debentures and other securities by the fund managers.

The fund manager realise gains or losses , and collects divident or interest incomes

Any capital gains or losses from such investments are passed on onto the investors in proportion of the nuber of units held by them

STRUCTURE OF MUTUAL FUND

A mutual fund is set up in the form of a trust, which has sponsor, trustees, asset management company (AMC) and a custodian. The trust is established by a sponsor or more than one sponsor who is like a promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unit-holders. The AMC, approved by SEBI, manages the funds by making investments in various types of securities, is run by professional managers. The custodian, who is registered with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI Regulations by the mutual fund. As per the regulations, Mutual Fund proposed by a sponsor has to be set up as a trust under the Indian Act, 1882 and not as a company under the Companies Act, 1956. All Mutual Fund have to be registered with the SEBI.

Indian Mutual fund industry

Mutual fund industry in India started in the sixties of the last century when the government established the Unit Trust of India in 1963 as a government initiative to give an alternative investment option to the public as well as establishing connectivity between the industry and the saving schemes of the public. This carried on for one and a half decade when the government allowed the entry of public sectors into the mutual fund business and subsequently the private investor companies. The major boost for the mutual fund sector came when the government liberalized the economy in 1991cand initiated financial sector reforms that included the mutual fund industry. In 1994 India became a member of the World Trade Organization (WTO) thereby allowing the entry of foreign mutual funds companies into India who introduced their funds and schemes in India for the general public. Along with this the government formulated specific laws and regulations for this industry along with supervision of its activities, especially the SEBI (Securities Exchange Board of India) and RBI (Reserve Bank of India). In addition to this the members of the mutual fund industry formed an association called AMFI (Association of Mutual Funds of India) to create a sounding board and articulate the views of the industry as well as formulating certain rules and conduct for their members. In terms of business growth the mutual fund industry has found initial acceptance from the general public due to the inherent advantages of investing in mutual fund schemes that gives higher returns in comparison to other forms of savings like fixed deposits. But it is still to gain the universal appeal that is
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therewith other forms of investment. This is due to the relative novelty of these schemes and the understanding level of general public about these schemes, the only alluring factor being the higher growth factor. Nevertheless the movement in this regard is on the positive front i.e. it is gradually growing with succeeding times. But it is a fact that the general public is yet to completely understand the full implications and advantages of investing in a mutual fund scheme. The entry of foreign mutual fund companies has increased the competition in this sector and both Indian and foreign mutual fund companies are adopting aggressive growth strategies to increase their market share. As a result investors are getting innovative schemes with better return facilities which are good for the future of the industry and the investors.

TYPES OF MUTUAL FUND SCHEMES

BY STRUCTURE :Open ended schemes In case of open-ended schemes, the mutual fund continuously offers to sell and repurchase its units at net asset value (NAV) or NAV-related prices. Unlike close-ended schemes, open-ended ones do not have to be listed on the stock exchange and can also offer repurchase soon after allotment. Investors can enter and exit the scheme any time during the life of the fund. Open-ended schemes do not have a fixed corpus.The corpus of fund increases or decreases, depending on the purchase or redemption of units by investors. There is no fixed redemption period in open-ended schemes, which can be terminated whenever the need arises. The key feature of open-ended funds is liquidity. They increase liquidity of the investors as the units can be continuously bought and sold Close ended schemes Close-ended schemes have a fixed corpus and a stipulated maturity period ranging between 2 to 5 years. Investors can invest in the scheme when it is launched. The scheme remains open for a period not exceeding 45 days. Investors in close-ended schemes can buy units only from the market, once initial subscriptions are over and thereafter the units are listed on the stock exchanges where they dm be bought and sold. The fund has no interaction with investors till redemption except for paying dividend/bonus. In order to provide an alternate exit route to the investors, some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. If an investor sells units directly to the fund, he cannot enter the fund again, as units bought back by the fund cannot be reissued.

 The close-ended scheme can be converted into an open-ended one. The units can be rolled over by the passing of a resolution by a majority of the unit--holders. Interval schemes Interval scheme combines the features of open-ended and close-ended schemes. They are open for sale or redemption during predetermined intervals at NAV related prices. BY NATURE Equity fund These funds invest a maximum part of their corpus into equities holdings. The structure of the fund may vary different for different schemes and the fund managers outlook on different stocks. The Equity Funds are sub-classified depending upon their investment objective, as follows:

Diversified Equity Funds Mid-Cap Funds Sector Specific Funds Tax Savings Funds (ELSS)

Debt fund The objective of these Funds is to invest in debt papers. Government authorities, private companies, banks and financial institutions are some of the major issuers of debt papers. By investing in debt instruments, these funds ensure low risk and provide stable income to the investors. Debt funds are further classified as:

Gilt Funds: Invest their corpus in securities issued by Government, popularly known as Government of India debt papers. These Funds carry zero Default risk but are associated with Interest Rate risk. These schemes are safer as they invest in papers backed by Government. Income Funds: Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities. MIPs: Invests maximum of their total corpus in debt instruments while they take minimum exposure in equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the risk-return matrix when compared with other debt schemes. Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested in
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corporate debentures.

Liquid Funds: Also known as Money Market Schemes, These funds provides easy liquidity and preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for short-term cash management of corporate houses and are meant for an investment horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are considered to be the safest amongst all categories of mutual funds.

BY INVESTMENT OBJECTIVES : Income funds: The aim of income funds is to provide safety of investments and regular income to investors. Such schemes invest predominantly in income-bearing instruments like bonds, debentures, government securities, and commercial paper. The return as well as the risk are lower in income funds as compared to growth funds. Growth funds: The main objective of growth funds is capital appreciation over the medium-to-long- term. They invest most of the corpus in equity shares with significant growth potential and they offer higher return to investors in the long-term. They assume the risks associated with equity investments. There is no guarantee or assurance of returns. These schemes are usually close-ended and listed on stock exchanges. Balanced funds: The aim of balanced scheme is to provide both capital appreciation and regular income. They divide their investment between equity shares and fixed bearing instruments in such a proportion that, the portfolio is balanced. The portfolio of such funds usually comprises of companies with good profit and dividend track records. Their exposure to risk is moderate and they offer a reasonable rate of return. Money market mutual funds: They specialise in investing in short-term money market instruments like treasury bills, and certificate of deposits. The objective of such funds is high liquidity with low rate of return.

OTHER SCHEMES Sectoral fund schemes Sectoral fund schemes are ideal for investors who have already decided to invest in a particular sector or segment. Tax saving schemes- Tax-saving schemes are designed on the basis of tax policy with special tax incentives to investors. Mutual funds have introduced a number of tax saving schemes. These are close--ended schemes and investments are made for ten years, although investors can avail of encashment facilities after 3 years. These schemes contain various options like income, growth or capital application. Equity- Linked Saving Schemes :- In order to encourage investors to invest in equity market, the government has given tax-concessions through special schemes. Investment in these schemes
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entitles the investor to claim an income tax rebate, but these schemes carry a lock-in period before the end of which funds cannot be withdrawn. Special schemes- This category includes index schemes that attempt to replicate the performance of a particular index such as the BSE Sensex, the which invest in specific sectors such as Technology, Infrastructure, Banking, Pharma etc. Besides, there are also schemes which invest exclusively in certain segments of the capital market, such as Large Caps, Mid Caps, Small Caps, Micro Caps, 'A' group shares, shares issued through Initial Public Offerings (IPOs), etc. Index funds: An index fund is a mutual fund which invests in securities in the index on which it is based BSE Sensex or S&P CNX Nifty. It invests only in those shares which comprise the market index and in exactly the same proportion as the companies/weightage in the index so that the value of such index funds varies with the market index. Exchange traded funds: Exchange Traded Funds (ETFs) are a hybrid of open-ended mutual funds and listed individual stocks. They are listed on stock exchanges and trade like individual stocks on the stock exchange. However, trading at the stock exchanges does not affect their portfolio. ETFs do not sell their shares directly to investors for cash. The shares are offered to investors over the stock exchange. ETFs are basically passively managed funds that track a particular index such as S&P CNX Nifty. Since they are listed on stock exchanges, it is possible to buy and sell them throughout the day and their price is determined by the demand-supply forces in the market. In practice, they trade in a small range around the value of the assets (NAV) held by them. ETFs offer several distinct advantages. ETFs bring the trading and real time pricing advantages of individual stocks to mutual funds. The ability to trade intraday at prices that are usually close to the actual intra-day NAV of the scheme makes it almost real-time trading. ETFs are simpler to understand and hence they can attract small investors who are deterred to trade in index futures due to requirement of minimum contract size. Small investors can buy minimum one unit of ETF, can place limit orders and trade intra-day. This, in turn, would increase liquidity of the cash market. ETFs provide the benefits of diversified index funds. The investor can benefit from the flexibility of stocks as well as the diversification. ETFs can be beneficial for financial institutions also. Financial institutions can use ETFs for utilizing idle cash, managing redemptions, modifying sector allocations, and hedging market exposure.

The first ETF to be introduced in India is Nifty Bench mark Exchange-Traded Scheme (Nifty BeES). It is an open-ended ETF, launched towards the end of 2001 by Benchmark Mutual Funds. The fund is listed in the capital market segment of the NSE and trades the S&P CNX Nifty Index. The Benchmark Asset Management Company has become the first company in Asia (excluding Japan) to introduce ETF.
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Fixed Maturity Plans Fixed Maturity Plans (FMPs) are investment schemes floated by mutual funds and are close ended with a fixed tenure, the maturity period ranging from one month to three/five years. These plans are predominantly debt-oriented, while some of them may have a small equity component. The objective of such a scheme is to generate steady returns over a fixed-maturity period and protect the investor against market fluctuations. Capital Protection Oriented Schemes Capital Protection Oriented Schemes are schemes that endeavour to protect the capital as the primary objective by investing in high quality fixed income securities and generate capital appreciation by investing in equity / equity related instruments as a secondary objective. The first Capital Protection Oriented Fund in India, Franklin Templeton Capital Protection Oriented Fund opened for subscription on October 31, 2006. Gold Exchange Traded Fund (GETFs):- Gold Exchange Traded Funds offer investors an innovative, cost-efficient and secure way to access the gold market. Gold ETFs are intended to offer investors a means of participating in the gold bullion market by buying and selling units on the Stock Exchanges, without taking physical delivery of gold. The first Gold ETF in India, Benchmark GETF, opened for subscription on February 15, 2007 and listed on the NSE on April 17, 2007. Quantitative Funds:- A quantitative fund is an investment fund that selects securities based on quantitative analysis. The managers of such funds build computerbased models to determine whether or not an investment is attractive. In a pure "quant shop" the final decision to buy or sell is made by the model. However, there is a middle ground where the fund manager will use human judgment in addition to a quantitative model. The first Quant based Mutual Fund Scheme in India, Lotus Agile Fund opened for subscription on October 25, 2007. Funds Investing Abroad :-With the opening up of the Indian economy, Mutual Funds have been permitted to invest in foreign securities/ American Depository Receipts (ADRs) / Global Depository Receipts (GDRs). Some of such schemes are dedicated funds for investment abroad while others invest partly in foreign securities and partly in domestic securities. While most such schemes invest in securities across the world there are also schemes which are country specific in their investment approach. Fund of Funds (FOFs):- Fund of Funds are schemes that invest in other mutual fund schemes. The portfolio of these schemes comprise only of units of other mutual fund schemes and cash / money market securities/ short term deposits pending deployment. The first FOF was launched by Franklin Templeton Mutual Fund on October 17,2003. Fund of Funds can be Sector specific e.g. Real Estate FOFs, Theme specific e.g. Equity FOFs, Objective specific e.g. Life Stages FOFs or Style specific e.g.Aggressive/ Cautious FOFs etc.

Names of some Mutual Funds

Private sector UTI(1964) SBI MF(1987) CANBanK MF(1987) BOI MF(1990) PNB MF(1990) BOB MF GIC MF(1989) IDBI MF Kothari Pioneer MF ICICI MF Private Sector HDFC MF ING Saving MF Birla MF Reliance MF Kotak Mahindra MF Taurus MF, etc

Benefits of Mutual Fund

Expert on your side: When you invest in a mutual fund, you buy into the experience and skills of a fund manager and an army of professional analysts Limited risk: Mutual funds are diversification in action and hence do not rely on the performance of a single entity. More for less: For the price of one blue chip stock for instance, you could get yourself a number of units across a number of companies and industries when you invest in a fund! Easy investing: You can invest in a mutual fund with as little as Rs. 5,000. Salaried individuals also have the option of investing in a monthly savings plan. Convenience: You can invest directly with a fund house, or through your bank or financial adviser, or even over the internet. Investor protection: A mutual fund in India is registered with SEBI, which also monitors the operations of the fund to protect your interests.

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Quick access to your money: It's good to know that should you need your money at short notice, you can usually get it in four working days. Transparency: As an investor, you get updates on the value of your units, information on specific investments made by the mutual fund and the fund manager's strategy and outlook. Low transaction costs: A mutual fund, by sheer scale of its investments is able to carry out cost-effective brokerage transactions. Tax benefits: Over the years, tax policies on mutual funds have been favourable to investors and continue to be so.

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PHASES OF MUTUAL FUND INDUSTRY IN INDIA

The formation of Unit Trust of India marked the evolution of the Indian mutual fund industry in the year 1963. The primary objective at that time was to attract the small investors and it was made possible through the collective efforts of the Government of India and the Reserve Bank of India. The history of mutual fund industry in India can be better understood divided into following phases:

PHASE- I ( 1964-1987)
GROWTH OF UNIT TRUST OF INDIA (UTI) In this phase there was complete monopoly of the Government. The Unit Trust of India was created in 1963 and functioned under the regulatory and administrative control of Reserve Bank of India (RBI). It was an associate institute of the RBI till February 1976.In 1978 it came under the administrative and regulatory control of Industrial Development Bank of India (IDBI) from RBI. The initial capital was contributed by the RBI, LIC, SBI and other banks which are largely invested in corporate securities. The first scheme that was launched as Unit Scheme 64,which was the first open-ended and was most popular scheme. After amendment of UTI Act in 1986, the UTI is now allowed to grant term loans, rediscounted bills, undertake equipment leasing and hire-purchase financing, provide housing and construction finance, provide merchant banking and portfolio management services, and also setup overseas or off-shore funds. UTI launched more innovative schemes in 1970s and 80s to suit the needs of different investors. It launched ULIP in 1971, six more schemes between1981-84, Children's Gift Growth Fund and India Fund (India's first offshore fund) in 1986, Mastershare (India's first equity diversified scheme) in 1987 and Monthly Income Schemes (offering assured returns) during 1990s. It launched India Fund in 1986-the first Indian offshore fund for overseas investors, which was listed on the London Stock Exchange (LSE). UTI maintained its monopoly and experienced a consistent growth till 1986.

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 PHASE II ( 1987- 1993)

ENTRY OF PUBLIC SECTOR FUNDS The Indian mutual fund industry witnessed a number of public sector players entering the market in the year 1987. In November 1987, SBI Mutual Fund from the State Bank of India became the first non-UTI mutual fund in India. SBI Mutual Fund was later followed by Canbank Mutual Fund, LIC Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund, GIC Mutual Fund and PNB Mutual Fund. By 1993, the assets under management of the industry increased seven times to Rs. 47,004 crores. However, UTI remained to be the leader with about 80% market share. The second phase witnessed the entry of mutual fund companies sponsored by public sector banks and financial institutions (FIs). In 1987, SBI Mutual Fund which is a subsidiary of State Bank of India became the first non-UTI mutual and Canbank Mutual Fund were set up as trusts under the Indian Trust Act, 1882. By 1990, that LIC Mutual fund, Indian Bank Mutual Fund, Bank of India Mutual Fund, GIC Mutual Fund and PNB Mutual Fund was formed. In 1988, UTI floated another offshore fund, namely, The India Growth Fund which was listed on the New York Stock Exchange (NYSB). In October 1989, the first regulatory guidelines were issued by the Reserve Bank of India, but they were applicable only to the mutual funds sponsored by FIIs. Subsequently, the Government of India issued comprehensive guidelines in June 1990 covering all mutual funds. These guidelines emphasised compulsory registration with SEBI and an arms length relationship be maintained between the sponsor and asset management company (AMC). With the entry of public sector funds, there was a tremendous growth in the size of the mutual fund industry with investible funds. Till 1992, the industry was a public sector monopoly in terms of both the number of funds and their market share.

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 PHASE-III (1993-1996)
EMERGENCE OF PRIVATE FUNDS With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of funds. There were also foreign fund management companies most of them entering through joint ventures with Indian promoters to enter the Mutual fund industry in 1993, provided a wide range of choice to investors and more competition in the industry. The Securities and Exchange Board of India (SEBI) issued the Mutual Fund Regulations in January 1993. SEBI notified regulations bringing all mutual funds except UTI under a common regulatory framework. Private domestic and foreign players were allowed entry in the mutual fund industry. Kothari group of companies, in joint venture with Pioneer, a US fund company(now merged with Franklin Templeton), set up the first private mutual fund the Kothari Pioneer Mutual Fund, in 1993. Kothari Pioneer introduced the first open-ended fund Prima in 1993. Several other private sector mutual funds were set up during this phase UTI launched a new scheme, Master-gain, in May 1992, which was a phenomenal success with a subscription of Rs 4,700 crore from 631akh applicants. Association of Mutual Funds in India (AMFI) was incorporated on 22nd August, 1995. (AMFI) modeled on the lines of a Self Regulating Organization (SRO) with a view to 'promoting and protecting the interest of mutual funds and their unit-holders, increasing public awareness of mutual funds, and serving the investors interest by defining and maintaining high ethical and professional standards in the mutual funds industry'. Association of Mutual Funds India has brought down the Indian mutual fund industry to a professional and healthy market with ethical lines enhancing and maintaining standards. It follows the principle of both protecting and promoting the interests of mutual funds as well as their unit holders. However, the year 1995 was the beginning of the sluggish phase of the mutual fund industry. During 1995 and 1996, unit holders saw an slowdown in the value of their investments due to a decline in the NAV s of the equity funds. Moreover, the service quality of mutual funds declined due to a rapid growth in the number of investor accounts, and the inadequacy of service infrastructure. A lack of performance of the public sector funds and miserable failure of foreign funds like Morgan Stanley eroded the confidence of investors in fund managers. Investors perception about
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mutual funds, gradually turned negative. Mutual funds found it increasingly difficult to raise money.

PHASE-IV (1996- 1999) GROWTH AND SEBI REGULATION

There was a robust growth and stricter regulation from SEBI after 1996 in the mutual fund industry. The mobilisation of funds and the number of players operating in the industry reached new heights as investors started showing more interest in mutual funds. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. The 1993 SEBI (mutual fund) regulation was substituted by a more comprehensive and revised mutual fund regulation in 1996 that set uniform standards for all mutual funds in India. The Union Budget in 1999 exempted all dividend incomes in the hands of investors from income tax. Various Investor Awareness Programmes were launched during this phase, both by SEBI and AMFI, with an objective to educate investors and make them informed about the mutual fund industry.

PHASE V ( 1999- 2004)

EMERGENCE OF LARGE AND UNIFORM INDUSTRY During this phase, the flow of funds in the mutual funds sharply increased. This significant growth was aided by a more positive sentiment in the capital market, significant tax benefits, and improvement in the quality of investor service. Rapid growth and significant increase of private players. Bond funds and liquid funds registered the highest growth (nearly 60% of assets).

By the end of this phase in 2003, a number of market consolidation movements in the form of mergers and acquisitions had occurred, and the position of the mutual fund market stood at 33 mutual funds.

In February 2003, Unit Trust of India Act 1963 was repealed and UTI was bifurcated into two separate entities. UTI-I THE SPECIFIED UNDERTAKING- The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. Unit
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Scheme of 1964 better known as US-64 as well as all assured return schemes of UTI was placed under UTI-I. UTI-II- THE UTI MUTUAL FUND. UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund regulations. It will be privatized on a pattern similar to the pattern of PSU privatization. It comprises of all NAV based UTI schemes for which there are no guarantees on either return or principal.

PHASE VI ( 2004 ONWARDS)

CONSOLIDATION AND GROWTH

The industry has also witnessed several mergers and acquisitions recently, examples of which are acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C Mutual Fund and PNB Mutual Fund by Principal Mutual Fund. Simultaneously, more international mutal fund players have entered India like Fidelity, Franklin Templeton Mutual Fund etc. There were 29 funds as at the end of March 2006. This is a continuing phase of growth of the industry through consolidation and entry of new international and private sector player. Setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. Since the 1993 liberalisation and the entry of new AMCs, there has been a spate of product innovation in the mutual fund product space. There has been a new age of retail focus through SIP and ELSS, between April 2006 and January 2008. Today, 41 AMCs offer a total of 918 schemes. Regulation pertaining to transparency of mutual fund distributions :The two recent and significant regulatory changes are : The removal of entry loads on all schemes, and an explicit disclosure of payment of commissions to distributors. Facilitating the process for an investor to change between distributors by eliminating the no objection certificate in December 2009. Mutual fund products in India are today largely distributed by national and regional distributors, private banks, Independent Financial Advisors (IFAs), public sector banks to a smaller extent, and some distribution takes place directly by the AMCs themselves. The withdrawal of the entry-load, which constituted a good part of the commissions passed on to the distributors, was one of the other factors leading to a sudden change in the distribution space.
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KYC is mandatory now- As of 1st April, 2011, KYC norms have become mandatory for all retail investors, irrespective of the amount investing. In the past, retail investors who had invested less than Rs 50,000 had not been required to follow KYC guidelines. It is mandatory for all investors, including NRIs and Non- Individuals, to be KYC compliant as of 1st, October 2010, even if the amount is Rs 1,000. KYC was first implemented in February, 2008, for all investors investing Rs 50,000 or more in Mutual funds in order to comply with the Prevention of Money Laundering Act of 2002.

Union Budget 2012-13: QFIs :-the Finance Minister has proposed to allow QFIs to access the Corporate Bond market. In this connection, a separate sublimit of 1 billion USD has been created for QFIs investment in corporate bonds and mutual fund debt schemes. Earlier, only foreign institutional investor and non-resident Indians were permitted to invest in mutual fund schemes. Direct access to foreign investors was not permitted. The Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) issued circulars to facilitate direct investment by QFIs (Qualified Foreign Investors) in mutual fund schemes. The SEBI and the RBI have issued circulars to facilitate such investments. The central government has decided to allow QFIs to directly invest in Indian equity market in order to widen the class of investors, attract more foreign funds, reduce market volatility and to deepen the countrys capital market. Tax incentives for investment in stock market:- Finance minister indicated introducing of a new equity savings scheme to encourage savings in financial instruments and improve the depth of capital market. The Finance Act provides deduction in the hands of a resident individual on investment in specified listed equity shares subject to satisfaction of certain conditions. The maximum deduction limit is 25,000 INR per year.

There should be common fund manager -The SEBI has amended the mutual fund regulation. AMCs shall now appoint a separate fund manager for each fund managed by it unless the investment objectives and assets allocations are the same and the portfolio is replicated across all the funds managed by the fund manager. The AMC will have to disclose on its website the returns on all its schemes managed by the fund manager. Business activities of AMC :-SEBI has permitted that an AMC may, itself or through its subsidiaries, undertake portfolio management services and advisory services for other than broadbased funds. Further, it has been laid down that an AMC shall not carry out any part of its activities including trading desk, unit holder servicing and investment operations outside India.

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The assets under management (AuM) for the mutual fund industry have risen.Booming markets in 2006 saw increased investor participation in the industry, leading to fund inflows enabling the AuM to grow. However, volatile market conditions in the last two years have led to net withdrawals by investors to the tune of 49,406 crore INR in FY 2010-11 and 22,023 crore INR in FY 2011-12, leading to a further drop in AuM, in addition to the drop caused by adverse market movements. The mutual fund industry is primarily debt-oriented with debt funds (including liquid funds) forming 64% of the AuM.

Overview of Indian Mutual Fund Industry asset:

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CONCLUSION
The Indian mutual fund industry is beginning to blossom and with the recent relaxations it is evident that the industry will rise to the international standard. India as a country holds great potential and the rise in income and savings levels signify the tremendous growth opportunity that lies ahead. The very presence of most significant international player in India demonstrates that they cannot afford to ignore the Indian market if they want to maintain their positions internationally. Also, Indian market has provided to be a good investment destination which has attracted foreign players to invest in Indian securities.

The mutual fund industry has witnessed several reforms in the last two decades. These have helped it expand. But lately, reforms have focused more on investor protection than on taking a balanced view of the institution, issuer, intermediary, investor and instruments. Reforms that focus on structural deficiencies, distribution incentives and a tax structure that encourages retail investment will help the industry grow in the long term.

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BIBLIOGRAPHY

Financial Institutions and Markets by LM Bhole

http://www.pwc.com/in/en/assets/pdfs/publications-2012/MutualFundIndustryIsThereASilverLiningJune21-2012.pdf http://www.amfiindia.com/ http://www.mutualfundsummit.com/download/Brochure_Summit%202012.pdf
The Phases of Mutual Funds | eHow.com http://www.ehow.com/list_7161670_phases-mutualfunds.html#ixzz24T3NKY67

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