Mutual funds are pooled investments that combine the capital of many investors to make investments across a range of asset types. A mutual fund can be the pension plan of a firm, the savings plan of an employee-owned business, or it can be run by a person or a family.
Future of Mutual Funds in India is essential component of India’s financial sector future. Retail investors seeking to place their money with reputable management companies and affordable index funds can choose from a variety of investment options provided by these companies.
They also give institutional investors a low-risk opportunity to develop new products or increase the flexibility of current portfolios.
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Growth of mutual Funds in India
India’s mutual fund business has grown tremendously during the last several years. The country’s rising income and expanding population are the main causes of this expansion and future of Mutual Funds in india is looking promissing.
Mutual fund investments serve as a source of income for those who are unable to work for themselves. The number of people willing to invest their money in mutual funds has increased as a result of this.
It has also increased the number of people who wish to invest in mutual funds but do not yet have adequate retirement savings or plans in place.
This indicates that they require assistance with their financial investments in order to begin putting together an investment portfolio as soon as possible.
Future of Mutual Funds in India
Due to these two developments, the mutual fund industry in India has undergone significant change in recent years: first, it is now easier than ever for people from all social classes to invest their money through mutual funds, and second, more people are starting earlier than ever to take advantage of higher returns from investing sooner rather than waiting until later.
History of the Mutual Fund Industry
In 1963, the mutual fund sector began to burgeon. Check out the timeline of events below:
- 1963 : The government’s creation of the Unit Trust of India.
- 1964 : UTI-Unit Scheme’s initial scheme is launched.
- 1987 : Public sector fund house access. The first PSU fund house was SBI Mutual Fund.
- 1993 : the establishment of private sector investment firms. The first private sector fund house was Franklin Templeton, formerly known as Kothari Pioneer.
- 1993 -2003 : The decade saw a lot of changes. The industry experienced numerous mergers and acquisitions as well as the development of international funds whereas SEBI took over the regulation of mutual funds.
- 2009 : lowering the entry load.
- 2012 :The Total Expense Ratio (TER) includes a portion for investor education. Launched was the Rajiv Gandhi Equity Savings Scheme (RGESS).
- 2013 : Equity fund Securities Transaction Tax (STT) was decreased. For the mutual fund schemes, a direct plan was introduced.
- 2014 : For a debt mutual fund, the word “long-term” was altered from 12 months to 36 months. The limit exemption under Section 80C was raised to Rs 1.5 lakhs.
- 2017 : The RGESS tax benefits were stopped. Mutual funds were reclassified by SEBI, and fund houses now have to execute the changes.
Pervious Years Growth of mutual fund industry in india
Over the past few years, the mutual fund business in India has seen certain difficulties. Demonetization in 2016 and the subsequent economic recession had a negative impact on the industry, which led to a sharp fall in investment inflows.
However, recently things have begun to improve for this sector. Investor confidence has increased as a result of the government’s efforts to improve financial inclusion and decrease leakages.
Additionally, fresh initiatives are frequently introduced to increase transparency and lower the expenses related to investing through mutual funds.
Last Decade
The assets under management of the Indian mutual fund industry rose from $24 billion to more than $1 trillion over the previous ten years. Changes in investor behavior, macroeconomic situations, & demographic trends have all contributed to this growth.
Although mutual funds have responded to them by diversifying into new sectors like infrastructure and private equity, the effects of these developments have been inconsistent across asset classes.
Over the past few years, the mutual fund business has undergone significant upheaval. The major modification is how fiercely competitive it has grown.
There were not many fund houses in India in the past. There are now hundreds of them, and each one is working hard to launch their product as soon as possible.
Now
Since the preceding years, the Indian mutual fund business has seen tremendous development. The most significant change is that in 2021, the government began its journey by creating a new tax structure for mutual fund businesses.
The new method makes it more difficult for people to cheat or misrepresent their financial information, which is intended to increase openness, transparency, and accountability throughout the sector. The way that technology is affecting financial management is another significant change.
Mutual funds used to have human managers who would assess a fund’s portfolio’s performance and make adjustments in response to market developments. They may now employ algorithms to monitor how much each member has put in various funds.
Scope of Mutual Funds
1.86 crore families with an annual income of more than Rs 10 lakh will have 1.86 crore registered mutual fund investors in India in 2022, according to estimates. In comparison to prior years, the number of mutual funds available is likewise rising exponentially.
There are now nearly 50 different schemes available, through each financial institution offering a broad range of options under various categories such as equity funds, balanced funds, etc., making it difficult for investors to select among them.
A few years ago, all of the top financial institutions, such as HDFC MF and ICICI Prudential MF, offered just three major funds. Today, however, there are approximately 50 different schemes available.
Forthcoming years future of Mutual Funds in india
Even while mutual fund competition has grown significantly over the years, their performance has remained continuously strong over that period, and investors have benefited much from them.
With a growth rate of approximately 40% annually, the industry has expanded quickly in recent years. It is anticipated that this rate would remain at or near 30% in 2022.
The increased demand for financial products among investors is the primary driver of this expansion. In order to accommodate this need, more people are now putting their money in mutual funds as a result of this.
In addition, there is a rise in interest in investing more money in the stock market, which has increased demand for equity-oriented mutual funds.
Trends of future of Mutual Funds in india
In terms of the investment alternatives offered on exchanges or other channels by which investors can put money into stocks, this trend is anticipated to continue into 2022 as well.
Over the years, India’s mutual fund market has experienced enormous growth. The business began with about 200 funds barely five years ago, and today there are more than 1000.
Due to growing investor demand for money, the mutual fund business is expanding. People have grown increasingly at ease investing in mutual funds as investments in other industries, such as real estate, gold, and other commodities, have increased.
Conclusion
Many consumers have also come to understand that, in comparison to more conventional investment options like bank deposits and fixed deposits, investing in mutual funds gives them more flexibility.
For instance, if you wish to withdraw money from your mutual fund account, you can do so without worrying that inflation or falling interest rates will cause your investments to lose value over time.
Additionally, given that India currently offers a huge variety of funds, you can be sure not to overlook any choices when seeking for the one that best meets your demands.
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FAQ About Future of Mutual Funds in India
Is it safe to invest in mutual funds in India now?
Many investors select mutual funds because they offer moderately stable long-term asset growth. When opposed to direct stock investments, these investment products are frequently thought of as a secure way to put money.
Is it good to invest in mutual funds now?
Absolutely certainly. The markets have decreased significantly, which has caused the NAVs of mutual fund schemes to decrease. You could earn good returns when the markets start to rise if you invest now.
Is mutual fund better than FD?
You can choose between a Fixed Deposit, Systematic Investment Plan, or Mutual Fund based on your financial objectives. Every investment strategy has advantages. An FD is a safer option with guaranteed returns, even though a SIP or mutual fund can offer you a higher rate of interest.
Can a mutual fund go to zero?
Any investment might theoretically become Zero. Therefore, if you have stock investments and one of the companies fails, the value of your investment in those stocks is zero. That is the risk associated with stock investing.
Is mutual funds safe for long term?
In general, mutual funds are considered to be a secure investment and an excellent way for investors to diversify with little risk. A mutual fund may not always be the best option for a market participant, particularly when it comes to costs.
