Understanding the Future of the Mutual Fund Industry in India

A mutual fund can be defined as a pooled investment which pools money together from multiple investors and invests in various asset classes. Mutual funds can be seen as a corporations’ pension plan, or the savings plan for employee-owned companies, or can be managed by a family or an individual.
 

Mutual funds are a vital part of India’s financial services. They provide a vast range of investment products to retail investors, particularly if you are interested in investing your money with professional management teams, and index funds that are low-cost. Mutual fund schemes also provide you as an institutional investor with a low-risk option to create new products, or make additions in terms of flexibility to your existing portfolios.
 

India has seen a significant growth in the mutual fund industry in the past few years. This growth can be seen primarily because of the growing population and the increasing wealth in the country. Investing in mutual funds creates a source of income for those who cannot work for them. Therefore, there has been a major rise in the number of people who are willing to invest in mutual fund schemes. 

• From 1963 to 2024, there are several changes and developments that the Indian mutual fund industry has seen.
• These changes include government policies, regulatory changes, and technological advancements, among other things.
• In the past ten years, the mutual fund industry in India has seen an increase in its asset management, growing from $24 billion to $1 trillion.

It was 1963 when the mutual fund industry had started mushrooming. Let us take a look at the chronology of events:

• 1963: The Unit Trust of India was established by the government.
• 1964: The first UTI-Unit Scheme was launched.
• 1987: The public sector house enters, SBI Mutual Fund being the first PSU fund house.
• 1993: The private sector house emerges, Franklin Templeton (formerly Kothari Pioneer) being the first private sector fund house.
• 1993 to 2003: This decade came with several developments. SEBI took over the mutual fund regulations, and the industry saw multiple mergers and acquisitions, alongside foreign funds also being established.
• 2009: Entry load was removed.
• 2012: A part of the TER or Total Expense Ratio was now being used for investor education. The Rajiv Gandhi Equity Savings Scheme or RGESS was also launched.
• 2013: Reduction of the Securities Transaction Tax or STT for equity funds.
• 2014: For debt mutual funds, long-term was now defined as 36 months, and not 12 months.The exemption limit under Section 80C was increased to Rs. 1.5 lakhs.
• 2017: Discontinuance of the tax benefits under RGESS. SEBI recategorised the mutual funds which were to be implemented by fund houses.

The mutual fund industry of India has been facing certain challenges over the past few years. There was a significant decline in investment flow due to the 2016 demonetisation and the economic slowdown that followed.
 

However, things have gotten quite better in recent times, with the government making efforts to reduce leakages and improve financial inclusion, which has boosted investor confidence. New initiatives are regularly being launched aiming to reduce the costs associated with investing in mutual funds, and improve transparency in the process.
 

There has been a major increase in asset management in the mutual fund industry over the past ten years. This growth is primarily because of changes in demographics, investor behaviour, and macroeconomic conditions. The mutual fund industry has now become very competitive.
 

When the government introduced a new tax regime in 2021, the Indian mutual fund industry saw another significant change. The new regime aims to bring in improved transparency, openness, and accountability in the industry, by ensuring that people can no longer misrepresent their financial information and cheat easily.
 

Another major change is the advancement of technology. Today, instead of human managers, there are algorithms being used to keep track of the finances.

The Indian mutual fund industry has seen significant growth over the years since its beginning in 1963. If you are an investor looking at mutual fund schemes, it is important for you to be aware of historical data, to make informed decisions while investing in mutual funds.
 

The Bajaj Finserv Mutual Fund Platform offers over 1,000 mutual funds that you could choose from. Furthermore, the platform also has a mutual fund calculator which could help you compare mutual funds, and select funds that are best suited for you, based on your investment horizon, risk appetite, and financial goals.