chapter – 3 resource mobilization by public and...
TRANSCRIPT
59
CHAPTER – 3
RESOURCE MOBILIZATION BY PUBLIC AND PRIVATE SECTOR
MUTUAL FUNDS
This chapter is divided into three sections. The first section deals with various
phases of development of the public and private sector mutual funds before and after
deregulation. Section II deals with the trends in the resource mobilization by mutual
funds before and after the deregulation of mutual fund industry. Section III examines
the institution wise break up of Assets Under Management, sales and redemptions of
mutual funds and unit holding pattern. A client wise break-up of mutual fund assets
and portfolio investment is also presented.
SECTION-I
Phases of Development
The Mutual Fund Industry in India has passed through various phases of
growth and hurdles. The long journey of more than four decades of the Mutual Fund
Industry in India can be grouped under four phases.
Phase I – Monopoly of UTI (July 1964-November 1987):
This period was dominated totally by the UTI, which prepared a ground for
the future mutual fund industry. Unit Trust of India (UTI) was established in 1963 by
60
an Act of Parliament by the Reserve Bank of India (RBI) and functioned under its
regulatory and administrative control1. The UTI commenced its operations with an
initial capital of Rs. 5 crore contributed by the RBI (Rs. 2.50 crore), State Bank of
India (Rs.0.75 crore), Life Insurance Corporation of India (Rs. 0.75 crore), certain
other scheduled banks and specified financial institutions (Rs. 1 crore) to its maiden
Scheme US-642.
The first decade of the UTI (1964-74) was the formative period. The first
product launched by the UTI was Unit-64 and later on the Unit Linked Insurance
Plan in 1971. By the end of June 1974, UTI has six lakh unit holders.
The Second Phase of operations (1974-84) was one of the consolidation and
expansions. In 1978, UTI was de-linked from the RBI and the Industrial
Development Bank of India (IDBI) took over the regulatory and administrative
control in the place of RBI and Open-Ended growth funds were introduced. Six new
schemes were launched during 1981-84. “By the end of June 1984, the investible
funds of the UTI crossed Rs. 1,000 crore and the number of unit holders reached 17
lakh”3.
During 1984-87, many innovative schemes like Children’s Gift Growth Fund
(1986), Master Share (1987), First Indian off shore fund, India Fund (1986) were
1 Pendharkar Viswanadh Gopal, Unit Trust of India: Retrospect and Prospect, UBS Publishers, New Delhi, 2003, p.48. 2 Bhatt R.S., Unit Trust of India and Mutual Funds- A study by the UTI Institute of Capital Markets, Mumbai, 1996, p-19.3 Sadak H., Mutual Funds in India (Marketing Strategies and investment Practices) Response Books, New Delhi,2004 p.154.
61
launched. By the end of June, 1987, the Unit capital of UTI was worth Rs. 3,726.11
crore and the investible funds totalled over Rs. 4,563 crore, while the unit holding
accounts amounted to Rs. 29.7 lakh.
Phase II- Public Sector Competition (November 1987-October 1993):
Towards the end of 1980s, winds of change have started blowing across the
Indian economy and this period was marked by the entry of non-UTI public sector
mutual funds into the market. Many public sector financial institutions established
mutual funds in India. The first non-UTI mutual fund, SBI Mutual Fund was
launched by the State Bank of India in November 1987. This was followed by the
Canbank Mutual Fund (December 1987), LIC Mutual Fund (June 1989), Indian
Bank Mutual Fund (January 1990). “The entry of public sector mutual funds
attracted small investors and cumulative mobilization of resources went up from Rs.
4,563.68 crore in 1987 (mobilized by UTI alone) to Rs. 19,110.92 crore in 1990
(mobilized by all the above), a 319 per cent increase”4.
Later on, Bank of India, General Insurance Corporation (GIC) and Punjab
National Bank (PNB) entered into the mutual fund market and collections increased
to Rs. 37,480.2 crore in 1991-92. However the UTI remains the dominant player in
the market, though its share declined marginally from 87.9 per cent in 1988-89 to 84
per cent in 1991-92.
4 Ibid
62
The year 1992-93 and 1993-94 showed a decline in collections by the public
sector mutual funds because of two factors. Firstly, Securities Exchange Board of
India (SEBI) had prohibited mutual funds from launching any scheme with an
assured income and secondly, according to Mutual Fund Regulations 1993, Indian
mutual funds were to form Asset Management Companies (AMC) pending which
they could not launch any scheme. However, since the UTI was not under the
preview of SEBI, and was not prohibited from launching schemes with assured
incomes, its collections rose from Rs. 8,685.4 crore in 1991-92 to Rs. 11,057 crore in
1992-93, and the total collections of all mutual funds stood at Rs. 13,021 crore in
1992-93. At the end of 1993, the mutual fund industry has Assets Under
Management of Rs. 47,004 crores.5
Before 1989, there were no regulatory guidelines for the mutual fund industry
in India. Such guidelines were first issued by the RBI in October 1989 which were
applicable to the mutual funds floated by banks and comprehensive guidelines were
also issued by government of India in June 1990. They covered all the mutual funds
and made registration with SEBI mandatory. They also set norms for registration,
management, investment objectives, disclosure, pricing and valuation of securities
and so on. These guidelines were revised and the Securities and Exchange Board of
India (Mutual Funds) Regulations 1993 came into effect on 20 January 1993.
5 RBI Report on Currency and Finance, 2002
63
Phase III-Emergence of a Competitive Market: (October 1993 to January
2003):
A new era in the mutual fund industry began in 1993 with the entry of private
sector funds. Private sector funds have operational advantages like the best
managerial talents, latest technology and experienced foreign asset management
companies, which posed serious competition to the existing public sector funds.
The first private sector mutual fund to launch a scheme was the Madras based
Kothari Pioneer Mutual Fund (now merged with Franklin Templeton). It started the
open ended Prima Fund in November 1993. During the year 1993-94 five private
sector mutual funds-Kothari Pioneer Mutual Fund, ICICI Mutual Fund, 20th Century
Mutual Fund, Morgan Stanley Mutual Fund and Taurus Mutual Fund launched seven
schemes and mobilized an amount of Rs. 1,559.60 crore during the year 1993-94.
During 1994-95 six other mutual funds like Apple Mutual Fund, JM Mutual Fund,
Shriram Mutual Fund, CRB Mutual Fund, Alliance Mutual Fund and Birla Mutual
Fund entered the market and mobilized Rs. 1,326.8 crores. The total mobilization by
all mutual funds reached to Rs. 75,050.21 crore by March 1995.
However in the year 1995-96 the total mobilization by all mutual funds,
including UTI, fell drastically to Rs. 5,976.3 crore. As a result, cumulative
mobilization increased slightly and stood at Rs. 81,026.52 crore by March 1996. As
at the end of January 2003, there were 33 mutual funds with total assets of Rs.
64
1,21,805 crores. The Unit Trust of India with Rs. 44,541 crores of Assets Under
Management was way ahead of other mutual funds6.
Phase IV-Bifurcation of Unit Trust of India (Since February 2003):
In February 2003, following the repeal of the Unit Trust of India Act 1963,
UTI was bifurcated into two separate entities. One is the specified undertaking of the
Unit Trust of India with assets under management of Rs. 29,835 crores as at the end
of January 2003, representing broadly, the assets of US-64 scheme, assured return
and certain other schemes. The specified undertaking of the UTI, functioning under
an administrator and under the rules framed by Government of India and does not
come under the preview of the Mutual Fund Regulations7.
The second is the UTI Mutual Fund, sponsored by State Bank of India,
Punjab National Bank, Bank of Baroda and Life Insurance Corporation of India. It is
registered with the SEBI and functions under the Mutual Fund Regulations. With the
bifurcation of the erstwhile UTI which had in March 2000 more than Rs. 76,000
crores of assets under management and with the setting up of the 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 of growth. As at the end of March 2009, there were 35
funds, which manage assets of Rs. 4,17,300 crores under more than 1000 schemes8.
6 AMFI Quarterly and Monthly Reports, June: 20057 www.mutualfundsindia.com8 www.amfiindia.com
65
Figure 3.1 Assets Under Management (Phase Wise)
0
100000
200000
300000
400000
500000
600000M
ar-6
5
Mar
-87
Mar
-93
Mar
-03
Mar
-03
Mar
-03
Mar
-04
Mar
-05
Mar
-06
Mar
-07
Mar
-08
Mar
-09
Years
(Rs.
in
Cro
res)
Phase I Phase II Phase III Phase IV
66
Consequences of emergence of Competition: The emergence of competition
following the free entry of private sector funds exposed several financial weaknesses
in the Indian financial market like loose links in reforms process, lack of supervision
skills and incomplete regulations. The SEBI initiated a number of measures from
1995-96 to 1999-2000 to streamline the operations of mutual funds. The important
developments are summarised as under9:
SEBI revised the Mutual Fund Regulations and issued the revised SEBI (Mutual
Funds) Regulations in 1996.
SEBI issued standard offer documents and memoranda containing key
information.
A code of conduct of advertisement was issued by the SEBI.
RBI issued revised guidelines for money market instruments.
Assured return schemes failed to fulfill their promises.
Fund managers proved incompetent, in terms of both planning and performance.
Several funds witnessed management changes due to many mergers and
takeovers.
Non-Performance forced many funds to close down.
The Indian Mutual Fund Industry caught up with the global trend and there
emerged a strong market for open-ended funds. Many innovative schemes were
launched and sector funds became very popular.
9 Sadak H., Op. Cit., p. 162
67
SECTION-IIMutual Funds – Resource Mobilization
The concept of mutual funds was conceived to pool the resources from the
different investors and deploy the same in the capital market. In this section, the
trends and composition of resources mobilization of mutual funds of public and
private sectors were analysed.
Table 3.1 Sector-Wise Resource Mobilization of Mutual Funds(Rs. in crore)
Public SectorYear UTI Other than UTI Total (2+3) Private Sector Total
(4+5)1 2 3 4 5 6
1983-84 300 (100) - 300 (100) - 330 (100)1984-85 776 (100) - 776 (100) - 776 (100)1985-86 892 (100) - 892 (100) - 892 (100)1986-87 1261 (100) - 1,261 (100) - 1,261(100)1987-88 2,059 (89.13) 250 (10.87) 2,309 (100) - 2,309 (100)1988-89 3,855 (92.34) 320 (7.66) 4,175(100) - 4,175 (100)1989-90 5,584 (82.27) 1,203 (17.73) 6,787 (100) - 6,787 (100)1990-91 4,553(60.64) 2,956 (39.36) 7,508 (100) - 7,508 (100)1991-92 8,685(77.18) 2,567 (22.82) 11,253 (100) - 11,253(100)1992-93 11,057(84.92) 1,964 (15.08) 13,021 (100) - 13,021(100)1993-94 9,297(82.69) 387(3.44) 9,684 (86.12) 1,560(13.87) 11,243 (100)1994-95 8,611(76.37) 1,342 (11.90) 9,953 (88.27) 1,322(11.73) 11,275(100)1995-96 -6314 348 -5,966 133 -5,8331996-97 -3043 143 -2,900 864 -2,0371997-98 2,875(70.74) 440 (10.83) 3,315 (81.57) 749(18.43) 4,064(100)1998-99 170 (6.31) 459 (17.03) 629 (23.34) 2,067(76.66) 2,695(100)1999-00 4,548 (20.56) 631 (2.85) 5,179 (25.41) 16,937(76.59) 22,117(100)2000-01 322 (2.89) 1,521(13.65) 1,843 (16.54) 9,292(83.46) 11,135(100)2001-02 -7284 1,330 -5,954 13,977 8,0242002-03 -9434 1,895 -7,539 12,122 3,5832003-04 1,050 (2.20) 3,761(7.89) 4,811(10.09) 42,873(89.91) 47,684(100)2004-05 -2722 -2,677 -5,399 7,600 2,2012005-06 3,424 (6.5) 6,378 (12.07) 9,802(18.57) 42,977(81.43) 52,779(100)2006-07 7,326 (7.79) 7,621 (8.11) 14,947(15.90) 79,038(84.10) 93,985(100)2007-08 10,677 (6.94) 9,821 (6.39) 20,498 (13.33) 1,33,304 (86.67) 1,53,802 (100)2008-09 - - 5.721 P -34018P -28,297
*Correlation between public and private sector -0.9998211) Figures in brackets are percentages2) Source: The RBI Report on Currency and Finance, The RBI Annual Reports, Supplement to RBI Bulletin, Various Issues. 3) www.amfiindia.com4) P : Provisional
68
Figure 3.2
Figure 3.3
69
The trends in the resource mobilization of mutual funds sector-wise is given
in Table 3.1.
Resources mobilized by mutual funds increased sharply in the eighties and
during the first two years of nineties. In the year 1986-87, UTI alone mobilized
Rs. 1,261 crore with an annual average growth rate of 382 per cent from 1983-
84. The annual average growth rate of the UTI from 1987-88 to 1992-93 was
107 per cent.
In the year 1987-88 itself public sector banks entered into the mutual fund market
and mobilization of resources have been contributed by both the UTI and Public
Sector Banks till 1992-93. In 1992-93 the total funds mobilized by both the
players reached to Rs. 13,021 crore, out of which UTI alone accounts for Rs.
11,057 (84.92%) crore. Resources mobilized during the period from 1981-82 to
1991-92 grew at an annual average growth rate of 71 per cent aided mainly by
the buoyant secondary market, setting up of new mutual funds in the second half
of the eighties and tailor-made schemes introduced by them and the UTI. High or
assured rate of returns offered by some mutual funds were other contributing
factors.
Resources mobilization by mutual funds in the nineties suffered a serious set
back, although during the period many new mutual funds came into existence.
The overall decline in resource mobilization by mutual funds in general could be
ascribed to the depressed stock market conditions, and the decline during 1998-
99 was due to redemption pressure faced by the UTI in respect of the US-64
70
Schemes. Despite these depressed stock market conditions, private sector mutual
funds account for an annual growth rate of 86 per cent from 1993-94 to 2002-03.
Resources mobilized by mutual funds increased sharply to as high as Rs. 47,684
crore during 2003-04. It is mainly due to a sharp rise in resources mobilized by
the private sector mutual funds to an amount of Rs. 42,873 crore. Funds
mobilized by mutual funds declined during 2004-05 due to net outflows recorded
by the UTI and public sector mutual funds.
There after a sharp rise has been noticed during the following three years due to
bullish market and the funds reached to Rs. 1,53,802 crore for the year 2007-08.
Of this 87 per cent is contributed by the private sector. Other factors for an
alround growth of 63 per cent during the year 2007-08 are increase in
geographical coverage and more and more household participators. Thereafter
reflecting the financial ‘Tsunami’ impacted the Indian economy and the
resources mobilized were also declined from May 2008 and showed negative
growth for the year 2008-09.
Therefore it is significant to note that out of the total resource
mobilization from the year 1998-99, 87 per cent share has been accounted by
the private sector mutual funds unlike in the past, when public sector mutual
funds particularly the UTI dominated the industry. It is also evident from the
Figure 3.2 and 3.3 and also proved by the negative correlation between the
resources mobilized by the public and private sector.
71
Table 3.2 Sector-wise Mobilization of Resources by Mutual Funds and the Number of schemes.
(Rs. Crores)UTI @ Other Public Sector Private Sector Total
Year No.of
SchemesAmount
Rs.No.of
SchemesAmount
Rs.No.of
SchemesAmount
Rs.No.of
SchemesAmount
Rs.1994-95 18
(33.00)8611.0(76.75)
20(37.00)
1337.0(11.86)
16(30.00)
1326.8(11.39)
54(100)
11274.8(100)
1995-96 23(41.82)
-5719.0 16(29.09)
338.7 16(29.09)
239.1 55(100)
-5141.2
1996-97 40(47.62)
-3043.0 12(14.29)
174.1 32(38.09)
556.2 84(100)
-2312.7
1997-98 79(58.09)
2119.0(64.11)
17(12.50)
528.5(15.99)
40(29.41)
657.9(19.90)
136(100)
3305.4(100)
1998-99 84(45.80)
170.0(4.71)
23(12.67)
922.0(25.54)
76(41.53)
2518.7(69.75)
183(100)
3610.7(100)
1999-00 N.A. 4548.0(20.70)
34(22.08)
252.6(1.15)
120(77.92)
17170.8(78.15)
154(100)
21971.4(100)
2000-01 87(28.34)
322.0(2.89)
57(18.57)
1520.6(13.66)
163(53.09)
9292.1(83.45)
307(100)
11134.7(100)
2001-02 71(18.30)
-7284.0 73(18.81)
-1330.4 244(62.89)
13977.1 388(100)
8023.5
2002-03 59(12.55)
-9434.0 74(15.75)
1988.0 337(71.70)
12026.0 470(100)
4580.0
2003-04 41(8.78)
1050.0(2.20)
64(13.70)
3761.0(7.89)
362(77.52)
42873.0(89.91)
467(100)
47684.0(100)
2004-05 N.A. -2722.00 N.A. -2677.0 N.A. 7600.00 - 2201.0
2005-06 48 (8.1) 3424 (6.5) 75 (12.67) 6379 (12.07)
469 (79.27)
42977(81.43)
592(100)
52779(100.0)
2006-07 51 (8.06) 7326 (7.79)
71 (9.40) 7621 (8.11)
633 (82.54)
79038(84.10)
755(100)
93985(100.0)
2007-08 54 (6.38) 10677 (6.94)
77 (9.10) 9821 (6.39)
715 (84.52)
133304 (86.67)
846 (100) 153802(100.0)
2008-09 53 (5.28) - 92 (9.17) - 858 (85.55)
-34018 1003 (100)
-28297
Correlation between UTI schemes and UTI Amounts – 0.123275. Correlation between other than UTI Schemes and other than UTI Amount
0.675463. Correlation between private sector schemes and private sector amounts
0.912474
@ Net sales value with premium under all domestic schemesP-provisional Source: RBI Report on currency and finance, RBI Annual Report, Supplement to RBI Bulletin, Various issues. Value Research, Mutual Fund Insight, various issues.
72
Table 3.3 Correlation Values between schemes
UTI
Other than
UTIPrivate
UTI1
Other than UTI0.403650343 1
Private0.22782427 0.860876607 1
TABLE 3.4 ANOVA
Source of VariationSS df MS F F crit
Between Groups319249.7 2 159624.9 8.134536 3.238096
Within Groups765301.1 39 19623.1
Total1084551 41
Sector-wise Resources mobilization of Mutual Funds and the number of
Schemes:
Table 3.2 reveals sector-wise mobilization of resources by mutual funds and
their schemes during 1994-95 and 2008-09. The share of Public Sector in terms of
the number of schemes and the volume of funds have been gradually occupied by the
private sector after deregulation.
73
In the year 1994-95, there were 54 schemes in all sectors, which mobilized Rs.
11,274.8 crore. Out of this, 38 (70%) schemes are related to the UTI and the
public sector. Because of innovative schemes introduced by the UTI and public
sector banks, and the UTI’s wide marketing net work, growing agency force and
opening of more number of branch offices, funds mobilized by these schemes
reached to Rs. 9,948 (88%).
Though the number of mutual fund schemes had risen to 84 by 1996-97, during
1995-1996 - 1996-97, the overall performance of mutual fund industry was not
encouraging due to depressed secondary market and the public sector (including
UTI) shows net outflows. Where as in the case of private sector, the number of
mutual fund schemes had gone up to 32 (38%) to the year 1996-97 which
accounts for Rs. 556.2 crore. For the year 1998-99 number of mutual fund
schemes operated by public sector (including UTI) has rised to 107 (58%) which
accounts for Rs. 1,092 (30%) only. During the same period all the total 76 (42%)
private sector mutual funds have mobilized Rs. 2,518.7 (70%) crore.
In the year 1999-2000, the overall performance of mutual fund industry was quite
encouraging and recorded more than six fold growth due to the spurt in resource
mobilization led by the private sector mutual funds. This improvement in
resource mobilization by mutual funds were brought about by two significant
developments i.e., tax benefit announced in the union budget for 1999-2000;
74
particularly those related to equity oriented schemes and bullish trend in the
secondary market.
For the years 2000-01 to 2002-2003, funds mobilized by public sector (including
UTI) had declined and showed negative balance though the number of schemes
for the same period had rised to a maximum of 144. This was due to the negative
impact of announcement by the Finance Secretary on September 1, 2002 on one
of the Private Channels that the UTI was being privatized10.
During the above period the number of private sector schemes reached to a
maximum of 337 and contributed major part (77%) in funds mobilization aided
mainly by the introduction of new schemes which are suited to the investors. For
the years 2003-04 and 2004-05 the share of public sector has decreased further
and reached to 10 per cent and it has been occupied by the private sector (90%).
Surprisingly, for the years 2005-06 to 2007-08 a sudden rise had noticed in the
number of schemes and funds mobilized both in the public and private sectors
due to bullish market, introduction of many innovative schemes in the potential
industry and redesigning and adopting suitable marketing strategies to reach out
to more and more households. And for the year 2008-09 though the number of
schemes crossed 1000, the industry witnessed for the first time since 2000, a net
outflow of funds due to world-wide recession.
10 Murali, D “UTI, Giri, Gaye?” Businessline, September 2, 2002, p.14.
75
Therefore, from the above analysis, it is clear that the share of public
sector in terms of number of schemes and funds mobilization – 70 per cent and
88 per cent respectively in 1994-95 had been gradually occupied by the private
sector after deregulation of the mutual fund industry and reached to 15 per cent
and 13 per cent respectively by the year 2008-09. It is also evident from the
correlation analysis. The correlation between the resources mobilized and the
number of schemes of private sector is highly positive, which shows that there is
an increase in the resources mobilized with the increase in number of schemes.
The negative correlation between the number of schemes and resource mobilization
of UTI shows that though the number of schemes increased there was a decline in
resource mobilization. And the correlation between the number of schemes of both
UTI and private sector is highly positive. The calculated value of F (8.134536) is
greater than the table value of F (3.238096). Hence it is also concluded that there is a
significant difference between the number of schemes and resource mobilization.
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Table. 3.5 Trends and Composition of Resources Mobilization by Mutual
Funds (As a percentage of GDP)
(at current market price)PublicPeriod / Year
Total Of Which UTI
Private Total
1970-71 to 1974-75 0.04 0.04 - 0.04
1975-76 to 1979-80 0.06 0.06 - 0.06
1980-81 to 1984-85 0.13 0.13 - 0.13
1985-86 to 1989-90 0.75 0.67 - 0.75
1990-91 to 1992-93 1.59 1.20 - 1.59
1992-93 to 1993-94 1.13 1.08 0.18 1.31
1993-94 to 1994-95 0.99 0.85 0.13 1.12
1994-95 to 1995-96 -0.50 -0.53 0.01 -0.49
1996-97 -0.21 -0.22 0.06 -0.15
1997-98 0.22 0.19 0.05 0.27
1998-99 0.06 1.01 0.14 0.15
1999-2000 0.25 0.23 0.88 1.15
2000-01 0.09 0.02 0.44 0.53
2001-02 -0.26 -0.32 0.62 0.35
2002-03 -0.31 -0.38 0.49 0.15
2003-04 0.17 0.04 1.55 1.73
2004-05 -0.17 -0.09 0.24 0.07
2005-06 0.28 0.08 1.20 1.48
2006-07 0.36 0.17 1.92 2.28
2007-08 0.43 0.23 2.83 3.26
2008-09 1.16 - -6.90 -5.74
Correlation between public sector and private sector - 0.190574
Source: Compiled from RBI Report on currency and Finance, various issues and National Income statistics, Centre for Monitoring Indian Economy.
77
Trends and Composition of Resource Mobilization by Mutual Funds – As a
percentage of GDP:
Table 3.5 reveals the trends and composition of resource mobilization by
mutual funds during 1970-71 and 2007-08. Resources mobilized as a percentage of
GDP had increased during the past decade, particularly in the case of private sector.
Since the UTI was only the mutual fund up to 1987-88, the resources mobilized
grew at a steady rate and continued till 1992-93 and stood at 1.59 per cent of the
GDP. This is aided mainly by the setting up of new funds, introduction of tailor-
made schemes due to buoyant secondary market.
The ratio stood at 1.15 per cent during the year 1999-2000 with the composition
of 0.88 per cent related to the private sector.
There after, the percentage has declined and reached 0.07 for the year 2004-05.
Where as in the case of public sector players, the ratio was negative in almost all
the years due to outflows of the UTI and other public sector funds. And for the
years 2004-2005 to 2007-2008 due to bullish trend in the secondary market, well
positioned regulatory guidelines, product offerings, systems, procedures and
service standards many investors were attracted towards mutual funds, thereby
all the ratios turned positive with an increasing tendency.
During the first eight months of 2008-09, with downward trend in stock market
and in view of the tight liquidity conditions precipitated by a variety of reasons
78
including advance tax outflows, suppliers credit withdrawal partly on account of
freezing of external credit markets and drying of money market liquidity, the
mutual fund industry faced unprecedented level of stress. The decline in the net
resource mobilization was especially pronounced in the month of June,
September, October 2008 and March 200911.
From the above, it is clear that the share of resource mobilization by the
public sector as a percentage of GDP has been decreasing phenomenally after
deregulation. On the other hand, the percentage of the private sector has an
increasing tendency. The combined effect of percentage of both the public and
private sector mutual funds showed decline in tendency in the total resource
mobilization by mutual funds as a percentage of GDP, except for the last three
years. It is also evident by the correlation analysis. The correlation analysis also
reveals negative relation between the resources mobilized as a per cent of GDP
of Public and Private Sector.
11 RBI Annual Report 2008-09 p.154
79
SECTION-III
Institution wise Break Up of Mutual Fund Assets, Sales and
Redemptions:
This section is mainly devoted to mutual fund Assets Under Management. In
this section, institution wise break-up of mutual fund assets, sales and redemptions of
public and private sector were presented for indepth analysis. For this purpose public
sector is divided under two heads viz., a) Bank sponsored b) Institutions. Bank
sponsored category is again shown under i) Joint venture predominantly Indian ii)
Others. Private sector is shown under four categories a) Indian b) Foreign c) Joint
Venture predominantly Indian d) Joint venture predominantly foreign12. A
comparative analysis of number of funds and assets under management, unit holding
pattern and assets under management, client-wise breaking of mutual fund assets and
client-wise portfolio investment is also presented.
12 www.amfiindia.com
80
Table No –3.6 Assets Under Management(year ended 31st March) (Institution wise)
(Rs. in Crore)2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Public SectorA. Bank SponsoredJoint venture predominantly Indian
7,842 (6.94)
3,333 (3.68)
3,970 (3.95)
3,220 (4.05)
5,202 (3.73)
6,595 (4.41)
13,186 (5.69)
16,807(5.15)
28,669(5.67)
26,758*(6.41)
Others 76,547 (67.74)
58,017 (64.05)
51,434 (51.13)
14,787 (18.61)
22,883 (16.39)
22,508 (1505)
31,933 (13.77)
37,763(11.57)
48,478(9.60)
37,801(9.06)
B. Institu-tions 3,570 (3.16)
3,507 (3.87)
4,237 (4.21)
5,935 (7.47)
6,539 (4.68)
3,010 (2.01)
5,229 (2.26)
9,643(2.95)
12,384(2.45)
17,825(4.27)
Private SectorIndian 2,331
(2.06)3,370 (3.72)
5,177 (5.15)
10,114 (12.73)
19,885
(14.24)
28,890 (19.31)
50,602(21.82)
80,157 (24.56)
1,52,795(30.25)
1,30,148(31.19)
Foreign - - - - 3,633 (2.60)
- - 30,294(6.00)
31,290(7.50)
Joint venture pre-dominantly Indian
9,724 (8.60)
8,620 (9.51)
15,502 (15.40)
24,593 (30.95)
33,143 (23.74)
47,934 (32.04)
74,144 (31.98)
1,04,779(32.10)
1,61,273(31.93)
1,53,262(36.73)
Joint venture pre-dominantly Foreign
12,991 (11.50)
13,740 (15.17)
20,277 (20.16)
20,815 (26.19)
48,331 (34.62)
40,663 (27.18)
56,768 (24.48)
77,239(23.67)
71,259(14.10)
20,216(4.84)
Total 1,13,005 (100.00)
90,587 (100.00)
1,00,594 (100.00)
79,464 (100.00)
1,39,616 (100.00)
1,49,600 (100.00)
2,31,862 (100.00)
3,26,388(100.00)
5,05,152(100.00)
4,17,300(100.00)
Source : AMFI Quarterly and Monthly ReportsFigures in Brackets are Percentages.* Include Rs. 612 crore related to joint venture predominantly foreign
81
Figure 3.4
Table 3.7 Correlation between different institutions of Public sector
Joint Venture predominantly
Indian Others InstitutionsJoint Venture predominantly
Indian1
Others-0.05995 1
Institutions-0.39961 0.049218 1
Assets Under Management of Public Sector (Institution wise)
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
20002001 200220032004 200520062007 20082009
Year (31st March)
Ru
pee
s in
Cro
res
Joint Venturepredominantly IndianOthers
Institutions
82
Figure 3.5
Table 3.8 Correlation between different institutions of private sectors
IndianJoint venture
predominantly Indian
Joint venture Predominantly
ForeignIndian
1Joint venture predominantly
Indian0.90737074 1
Joint venture Predominantly
Foreign-0.1229414 0.145441174 1
83
Assets Under Management : (Institution Wise)
Table- 3.6 shows sector-wise Assets Under Management from March 2000 to
March 2009. After deregulation, share of Indian mutual fund companies, Joint
venture predominantly Indian companies related to private sector have increased
their asset base manifold.
Assets Under Management from all sectors of mutual funds on March 2000
accounted for Rs. 1,13,005 crore. It has decreased to Rs. 79,464 crore by March
2003 and again rised year by year and reached to as high as Rs. 4,17,300 crore by
the March 2009. The period from 2001 to 2003 witnessed extreme volatility in
the market and the equity index declined by 28 per cent and as a result the Assets
Under Management too declined to Rs. 79,464 crore by the March 2003.
Moreover, bifurcation of the UTI and exclusion of the assets of specified
undertaking of the UTI is also an other effect. This is the first time in the last two
decades that the industry had such a decline in the total Assets Under
Management.
Bank sponsored mutual funds include joint venture predominantly Indian and
other mutual funds. Under joint venture, SBI mutual fund was only the mutual
fund which had nearly 7 per cent of asset base in March 2000 decreased with
fluctuations and reached to 6 per cent to March 2009. Share of assets of other
bank sponsored mutual funds 67.74 per cent include Bank of Baroda, Can Bank
and UTI Mutual Funds. This was declined to 18.61 per cent to March 2003 due
84
to bifurcation of the UTI and reached to 11.68 per cent to the March 2009. Bank
sponsored mutual funds though supported by strong financial institutions with
large investor base and latest technology have failed because of the absence of
will to adopt to the changes in the market and institutionalize the knowledge of
the new economy.
In the case of institutional mutual funds the share of only the mutual fund Jeevan
Bima Sahayog Ltd (LIC Mutual Fund) is almost constant in all years. Due to
inclusion of the GIC mutual fund and IDBI principal mutual fund for two years,
the share has been rised in 2003 and 2004.
Share of Indian private sector mutual funds in March 2000 was 2.06 per cent. It
has constantly gone up to 31.18 per cent to March 2009 due to rise in the assets
of Tata AMC, Reliance Capital AMC and Kotak Mahendra Mutual Fund and
opening up of some other Asset Management Companies under this category
Joint venture predominantly Indian have also rised their share from 8.60 per cent
to 36.73 per cent. This is due to rise in the assets of Birla Sunlife mutual fund,
DSP ML mutual fund, HDFC mutual fund and Pru ICICI mutual fund. Assets of
joint venture predominantly foreign have also rised from 11.50 per cent to 34.62
per cent to the year March 2004. Due to competition with predominantly Indian
companies and decrease in the net assets of principal PNB Asset Management
Company Private Limited and conversion of Franklin Templeton Asset
Management Company into foreign the percentage has decreased to 4.84 per cent
to March 2009.
85
The above analysis reveals that the share of Indian mutual fund
companies, Joint venture predominantly Indian companies had increased their
asset base manifold. On the other hand, assets of bank sponsored mutual funds
have decreased. Joint venture mutual funds predominantly foreign though
increased are lagging behind when compared to the Indian and predominantly
Indian mutual funds. This is evident by the correlation analysis. The correlation
analysis between joint venture predominantly Indian and other categories in the case
of public sector, and the correlation analysis between Indian and Joint venture
predominantly foreign in the case of private sector is negative. Correlation between
Joint venture predominantly Indian and Joint venture predominantly foreign though
positive is not significant because it is 0.145441.
86
Table 3.9 Sector Wise Mutual Fund Sales (for the year ended 31 March )
(Rs. In Crores)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Public Sector UTI
13,536(22.66)
12,413(13.35)
4,643(2.82)
7,062(2.24) - - - - - -
A. Bank Sponsored
1. Joint Venture-Predominantly Indian
1,828(3.06)
2,181(2.35)
4,242(2.58)
11,090(3.52)
46,661(7.91)
30,995(3.69)
48,167(4.39)
52,512(2.71)
1,43,324(3.21)
3,50,597*(6.46)
2. Others - - - - -59,451(7.08)
89,059(8.11)
1,61,501(8.33)
3,46,270(7.76)
4,23,131(7.80)
B. Institutions2,211(3.70)
4,011(4.31)
9,371(5.70)
17.535(5.57)
21,897(3.71)
12,800(1.52)
46,220(4.21)
1,24,607(6.43)
1,94,030(4.35)
3,63,066(6.69)
Private Sector
1. Indian 6,688
(11.19)19,901(21.41)
33,634(20.44)
83,351(26.49)
1,43,050(24.24)
2,42,428(28.87)
2,56,761(23.38)
4,79,754(24.75)
13,69,180(30.67)
17,82,552(32.85)
2. Foreign - - - -21,089(3.57) - - -
1,82,305(4.08)
2,57,363(4.74)
3. Joint Venture-Predominantly Indian
15,548(26.02)
20,796(22.37)
48,396(29.42)
71,513(22.73)
1,40,545(23.81)
1,56,879(18.69)
3,46,518(31.55)
6,21,899(32.08)
13,92,729(31.20)
18,75,872(34.57)
4. Joint Venture-Predominantly foreign
19,937(33.37)
33,655(36.21)
64,237(39.04)
1,24,122(39.45)
2,16,948(36.76)
3,37,109(40.15)
3,11,433(28.36)
4,98,319(25.71)
8,36,538(18.73)
3,73,772(6.89)
Total 59,748
(100.00)92,957
(100.00)1,64,523(100.00)
3,14,673(100.00)
5,90,190(100.00)
8,39,662(100.00)
10,98,158(100.00)
19,38,592(100.00)
44,64,376(100.00)
54,26,353(100.00)
Source :AMFI Quarterly and Monthly Reports* Include Rs. 3,192 crore related to Joint venture predominantly foreign
87
Figure 3.6
Table 3.10 Correlation between different institutions of Public Sector.
UTI
Joint Venture predominantly
Indian Others InstitutionsUTI
1Joint Venture predominantly
Indian-0.379584939 1
Others-0.55933895 0.055476 1
Institutions-0.185248541 -0.01591 0.068153 1
Mutual Fund Sales of Public Sector (Institution wise)
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
year
Ru
pee
s in
Cro
res
UTI
Joint Venture predominantly Indian
Others
Institutions
88
Figure 3.7
Table 3.11 Correlation between different institutions of Private Sector.
IndianJoint venture predominantly Indian
Joint venture predominantly Foreign
Indian1
Joint venture
predominantly Indian0.205216 1
Joint venture
predominantly Foreign-0.5069 -0.80416 1
Mutual Fund Sales of Private Sector (Institution Wise)
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Year
Ru
pee
s in
Cro
res
Indian
Joint venturepredominantly Indian
Joint venturepredominantly Foreign
89
Sector wise mutual fund sales
Table 3.9 reveals trends in the sales of mutual funds of public and private
sector from March 2000 to 2009. The analysis reveals that the sales of private sector-
Indian, Joint venture predominantly Indian and the institutions sales have increased.
Total mutual fund sales from all schemes during the year March 2000 were Rs.
59,748 crore. It has gone up to Rs.54,26,153 crore by the March 2009. The sales
of mutual funds in March 2000 were dominated by the Joint venture mutual
funds particularly foreign companies and the UTI. Out of the total sales during
March 2000, 22.66 per cent was contributed by the UTI and due to competition
with private sector and bifurcation of UTI this has fallen down to 2.24 per cent to
March 2003.
After bifurcation of the UTI in the year 2004 all bank sponsored under public
sector have shown under two heads as joint venture predominantly indian and
others. And SBI Mutual Fund was only the fund included in the first category.
And in the second category BOB Mutual Fund, Can bank Mutual Fund and UTI
Mutual Funds were included. Sales of joint venture predominantly indian (SBI
MF) have increased to 6.46 per cent by the year 2009. And the sales of other
mutual funds though increased, their share in the total sales was constant at 8 per
cent from the year 2005 to 2009.
The sales of institutions were 3.70 per cent in March 2000, which came down to
1.52 per cent in March 2005 mostly due to merger of the GIC Mutual Fund into
Tata Mutual Fund. Due to the introduction of innovative schemes and buoyancy
90
of secondary market, it has gained strength and the share reached to 6.69 per cent
by March 2009.
The share of the Indian private sector mutual funds which was 11.19 per cent in
March 2000 had gradually increased to 32 per cent in 2009 due to opening of
many innovative and investor friendly schemes by Tata Asset Management
company, Reliance Capital and Kotak Mahendra. The share of sales of Joint
Venture predominantly indian has increased from 26 per cent to 35 per cent
between the years 2000 and 2009 due to out performance of Joint venture
predominantly indian mutual funds like HDFC, Pru ICICI and DSP Merrill
Lynch etc. The sales of joint venture predominantly foreign have decreased from
33.37 per cent to nearly seven per cent for the above period.
From the above it is evident that private sector Indian, Joint venture
predominantly indian and institutions mutual fund sales of public sector have
increased. On the other hand sales of bank sponsored and private sector joint
venture predominantly foreign have decreased. It is proved by the negative
correlation between the institutions and other categories (UTI and joint venture
predominantly Indian) in the cases of public sector, and joint venture
predominantly foreign with the other categories (Indian and Joint venture
predominantly Indian) in the case of private sector.
91
Table 3.12 Sector Wise Mutual Fund Redemptions (for the year ended 31st March)
(Rs. in crores)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Public Sector
UTI
9,663
(23.45)
12,090
(14.42)
11,927
(7.58)
7,246
(2.41) - - - - - -
A. Bank Sponsored
1. Joint Venture-
Predominantly Indian
1,744
(4.23)
4,125
(4.92)
3,329
(2.12)
10,536
(3.50)
43,183
(7.95)
29.970
(3.56)
43,973
(4.21)
48,942
(2.65)
1,35,645
(3.15)
3,46,617*
(6.35)
2. Others N.A. N.A. N.A. N.A. N.A.
62.490
(7.46)
85,562
(8.18)
1,54,351
(8.37)
3,35,629
(7.79)
4,26,790
(7.82)
B. Institutions
1,864
(4.53)
3,147
(3.75)
8,550
(5.43)
16,121
(5.35)
19,796
(3.64)
16,183
(1.93)
44,108
(4.22)
1,20,381
(6.53)
1,91,851
(4.45)
3,57,112
(6.55)
Private Sector
1. Indian
5,718
(13.88)
17,576
(20.98)
31,181
(19.82)
79,341
(26.34)
1,33,131
(24.50)
2,38,065
(22.77)
2,38,065
(22.77)
4,50,447
(24.42)
13,11,006
(30.41)
18,06,550
(33.12)
2. Foreign - - - -19,248(3.54) - - -
1,75,937(4.08)
2,63,674(4.83)
3. Joint Venture-
Predominantly Indian
10,641
(25.83)
18,353
(21.89)
43,239
(27.48)
68,333
(22.68)
1,27,280
(23.41)
3,29,429
(31.52)
3,29,429
(31.52)
5,91,457
(32.07)
13,41,120
(31.11)
18,65,948
(34.21)
4. Joint Venture-
Predominantly foreign
11,574
(28.08)
28,538
(34.04)
59,122
(37.57)
1,19,648
(39.72)
2,00,743
(36.95)
3,04,245
(29.10)
3,04,245
(29.10)
4,78,934
(25.96)
8,19,387
(19.01)
3,87,959
(7.12)
Total
41,204
(100.00)
83,829
(100.00)
1,57,348
(100.00)
3,01,225
(100.00)
5,43,381
(100.00)
10,45,382
(100.00)
10,45,382
(100.00)
18,44,512
(100.00)
43,10,575
(100.00)
54,54,650
(100.00)
Source : AMFI Quarterly and Monthly Reports
* It includes Rs. 2637 related to joint venture predominantly foreign
92
Figure 3.8
Table 3.13 Correaltion between different institutions of Public Secor
UTIJoint Venture predominantly
IndianOthers Institutions
UTI 1
Joint Venture predominantly
Indian -0.07338 1
Others -0.621 -0.17454 1
Institutions -0.0744 -0.15416 0.10798 1
Mutual Fund Redemptions of Public Sector (Institution wise)
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Year
Rup
ees
in C
rore
s
UTI
Joint Venturepredominantly Indian
Others
Institutions
93
Figure 3.9
Table 3.14 Correlation between different institutions of Private Sector
IndianJoint venture
predominantly Indian
Joint venture predominantly
ForeignIndian
1Joint venture predominantly
Indian0.448295 1
Joint venture predominantly
Foreign-0.58426 -0.77064 1
Mutual Fund Redemptions of Private Sector (Institution wise)
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Year
Ru
pee
s in
Cro
res
Indian
Joint venture predominantly Indian
Joint venture predominantly Foreign
94
Sector-wise mutual fund redemptions
Table 3.12 depicts sector-wise mutual fund redemptions from all schemes
from March 2000 to 2009. After deregulation, redemptions of mutual funds have
gone up with sales.
Mutual fund redemptions from all schemes in March 2000 were Rs. 41,204 crore.
This has increased to Rs. 54,54,650 crore to the year March 2009. Share of
redemption of mutual fund schemes in March 2000 was dominated by joint
venture predominantly foreign (28.08%) predominantly indian (25.83%) and the
UTI (23.45%). Redemptions from the UTI have gradually decreased in
accordance with sales and reached to 2.41 per cent in March 2003.
Redemptions from bank sponsored schemes have gone up from 4.23 per cent in
March 2000 to around eight per cent in March 2004. Thereafter with wide
fluctuations it had reached to 6.35 per cent by the year 2009. Redemptions of
institutions have gone up to 6.35 per cent by March 2009.
Redemptions of Indian private sector mutual funds which were nearly 14 per cent
in March 2000 have increased to more than 33 per cent by the March 2009. And
redemptions of Joint venture mutual funds dominated by Indian share, which
were 26 per cent in March 2000 have goneup to 34 per cent by the March 2009.
And joint venture predominantly foreign though increased from 28 per cent to 40
95
per cent has decreased to 7.12 per cent by the March 2009 due to fluctuations in
sales. What is significant is the fact that the industry managed well the net
outflows of nearly rupees a lack crore due to economic recession during the
month of September and October 2008 with the support initiated by SEBI,
Government and extended by RBI.13
It is evident that the mutual fund redemptions in the case of purely
Indian, Joint venture predominantly Indian and institutions have increased. On
the other hand redemptions of the joint venture predominantly foreign in the
case of private sector have decreased. It is also proved by the correlation
analysis. The correlation between Institutions and Joint venture predominantly
Indian with other categories of public sector and the correlation of joint venture
predominantly foreign with the Indian and Joint venture predominantly Indian
in the case of private sector are negative.
13 www.amfiindia.com
96
Table 3.15 Number of Funds and Assets Under Management (Sector-wise)
(Rs. In Crore)
Public Sector (including UTI)
Private Sector TotalAt the end of March
No.of Funds
Assets Under
Management
No.of Funds
Assets Under
Management
No.of Funds
Assets Under
Management
2003 9
(27.27)
23,942*
(30.13)
24
(72.73)
55,522
(69.87)
31
(100.0)
79,464
(100.0)
2004 8
(25.80)
32,120
(23.22)
23
(74.20)
1,06,199
(76.78)
31
(100.0)
1,39,616
(100)
2005 6
(20.69)
31,977
(21.41)
23
(79.31)
1,17,349
(78.75)
29
(100.0)
1,49,600
(100)
2006 5
(17.24)
50,348
(21.71)
24
(82.76)
1,81,514
(78.29)
29
(100.0)
2,31,862
(100.0)
2007 5
(16.67)
64,213
(19.67)
25
(83.36)
2,62,175
(80.33)
30
(100.0)
3,26,388
(100.0)
2008 5
(14.28)
89,531
(17.72)
30
(85.72)
4,15,621
(82.28)
35
(100.0)
5,05,152
(100.0)
2009 5
(14.28)
82,384
(24.60)
30
(85.72)
3,34,916
(75.40)
35
(100.0)
4,17,300
(100.0)
(Figures exclude fund of funds)
Correlation between Number of Funds and AUM of Public Sector 0.678845
Correlation between Number of Funds and AUM of Public Sector 0.676193
Source: 1) AMFI Update Vol. 1 Issue VII.2) www.amfiindia.com3) RBI Report on currency and finance 4) AMFI Quarterly and monthly reports
Note: Figures in brackets are percentages * UTI bifurcation.
97
Number of Funds And Assets Under Management (Sector-Wise)
Table 3.15 shows sector-wise number of mutual funds and their Assets Under
Management from March 2003 to 2009. After deregulation, public sector has
weakened, in terms of number of players and Assets Under Management.
Of the total Assets Under Management at the end of March 1998, the share of
public sector was more than 94 per cent and the remaining share was related to
the private sector. However, the public sector has a deteriorating performance
where in its share had declined sharply to as low as 59 per cent by March 2002.
On the other hand the share of private sector has gone up manifold and reached
to Rs. 40,956 crore (41.%).
By March 2003, there were 33 funds in mutual fund industry which had Assets
Under Management of Rs. 79,464 crore. Out of which 9 funds related to public
sector had constituted 30 per cent. Where as in the case of private sector, there
were 24 mutual funds which had Assets Under Management to the tune of Rs.
55,522 crore or 70 per cent.
Assets Under Management both in the case of private and public sector had an
increasing tendency because of bullish secondary market and the support of the
foreign institutional investors. And the UTI occupies 59 per cent of the public
sector with an Assets Under Management of Rs. 48,754 crore as on 31 March
2009. And in the category of private sector Reliance Mutual Fund, HDFC Mutual
98
Fund and Franklin Templeton Mutual Fund were the biggest players and
constitute an Assets Under Management of Rs. 80,963 crore Rs. 57,956 crore and
Rs. 19,205 crore respectively as on 31 March 2009.
The number of mutual funds under public sector has come down to five due to
winding up of the PNB Mutual Fund in the year 2004 and the GIC Mutual Fund
taken over by the Tata Mutual Fund.
Two private funds ILFS Mutual Fund and Sun F&C Mutual Fund have been
taken over by the UTI Mutual Fund and the IDBI Mutual Fund respectively. This
number was compensated by the opening of two new funds i.e., Fidelity Mutual
Fund and ABN Amro Mutual Fund.
Number of funds and Assets Under Management of private sector for the year
2009 have further increased and reached to 30 and Rs. 3,34,916 (80.25%)
respectively by opening of funds like Quantum AMC Private Limited, Taurus
AMC Limited, AIG Global AMC, Mirae Asset Global Investment, Edelweiss
AMC, FIL fund management.
99
Therefore from the above it is clear that after deregulation, public sector
has weakened in terms of number of funds and Assets Under Management and
has been occupied by the private sector. It is evident by the percentages of
number of funds and Assets Under Management of both the public and private
sectors. And it is also proved by the correlation analysis. The correlation
between number of funds and Assets Under Management both in the case of
public and private sector is positive, which shows the change in the number of
funds (increase / decrease) causes the same degree of change (increase /
decrease) both in the case of public and private sectors.
100
Table 3.16 Unit holding Pattern of Mutual Fund Industry as on
31-03-2008
No.of Investor Accounts* Net Assets (Rs. In crore)Category
Public Private Total Public Private Total
(35.84) (64.16) (100.00) (22.88) (77.12) (100.00)
1,50,58,231 2,69,56,482 4,20,14,713 42,893.04 1,44,570.94 1,87,463.98Individuals
(98.30) (96.08) (96.86) (48.50) (34.48) (36.93)
(17.36) (82.64) (100.00) (9.02) (90.98) (100.00)
NRIs 1,48,965 7,08,985 8,57,950 2,227.91 22,469.59 24,697.50
(0.97) (2.53) (1.98) (2.52) (5.36) (4.86)
(81.37) (18.63) (100.0) (6.61) (93.39) (100.0)FIIs
734 168 902 555.02 7,845.49 8,400.51
(0.00) (0.00) (0.00) (0.63) (1.87) (1.65)
(22.38) (77.62) (100.00) (14.89) (85.11) (100.00)
1,12,235 3,89,364 5,01,599 42,758.42 2,44,349.59 2,87,108.01
Corporates/
Institutional/
Other (0.73) (1.39) (1.16) (48.35) (58.29) (56.55)
(35.32) (64.68) (100.00) (17.42) (82.58) (100.00)
1,53,20,165 2,80,54,999 4,33,75,164 88,434,38 4,19,235.61 5,07,669.99Total
(100.00) (100.00) (100.00) (100.00) (100.00) (100.00)
Correlation between Investor Accounts and Net Assets of Public Sector 0.5811172. Correlation between Investor Accounts and Net Assets of Private Sector 0.240245.
Source : sebi.gov.in/mf/unithold.html* There may be more than one folio of an investor which might have been counted more than once and actual number of investors would be less.
101
Unit holding pattern of Mutual Fund Industry
Table 3.16 shows sector-wise unit holding pattern and net assets of mutual
fund industry as on 31 March 2008. The result shows, that in the case of investor
accounts private sector individual players and in the case of net assets private sector
corporate players dominated the industry.
Out of the total 4.34 crore unit holding accounts, as on 31 March 2008, 2.80
crore (64.68%) are relating to the accounts of private sector, which constitute Rs.
4,19,235 (82.58%) of net assets. And the balance 1.53 crore (35.32%) investor
accounts are related to public sector constituting only Rs. 88,434 (17.42%) of
total assets.
It is surprising, that out of the total 4.34 crore investor accounts 4.20 crore
(96.86%) are related to individuals and they constitute Rs. 1,87,464 of net assets
(36.93%) only. Where as a small percentage of 1.16 (5 lakh) corporate and
institutional investors constitute Rs. 2,87,108 (56.55%) because they had a very
strong financial base and liquidity in the financial market.
It is also interesting to note that private sector players have attracted the
individuals and corporates than the public sector, with their latest technical and
managerial talents. Out of the total 4.20 crore individual investor accounts, 2.69
crore (64.16%) are related to private sector, constituting Rs. 1,44,571 (77.12%)
of net assets. And the remaining 1.50 crore (35.84%) investor accounts are
related to public sector constituting Rs. 42,893 (22.88%).
102
In the same way out of the 5 lakh Corporate / Institutional investor accounts 3.89
lakh (77.12%) are related to private sector, constituting Rs. 2,44,350 (85.11%) of
net assets. And the rest 1.12 lakh (22.38%) investor accounts are related to public
sector, constituting Rs. 42,758 (14.89%) of net assets. Though share of NRIs
among total investors is 8.58 lakh their contribution among total assets is less
than 5 per cent. Number of accounts and net assets of FIIs is very less and does
not effect the industry.
It is evident that the private sector individual investors dominated the
industry in the case of investor accounts and net assets. And number of private
corporate investor accounts though very less, they have contributed more than
half of the share in the total assets of the industry. Though the private sector
individual players in the case of investor accounts, corporates in the case of net
assets dominated the industry, the correlation between number of investor
accounts and net assets of public sector is more positive than in the case of the
private sector. It indicates that the increase in the net assets and investor
accounts is more related in public sector than in the private sector.
103
Table 3.17 Break-up of Mutual Fund Assets-Client wise
(as on 31.03.2009)
(Rs. in crores)
Sl.No. Client Amount Rs. %
1 Banks & FIs 19,238 4.61
2 Corporates 2,12,489 50.92
3 FIIs 4,882 1.17
4 High Networth Investors 91,931 22.03
5 Retail 88,760 21.27
Total 4,17,300 100.00
Source : Value Research, Mutual Fund Insight, VI(10) 15 June-14, July 2009ETFs does not include Gold ETFsHNIs defined as investors investing over Rs.5 lakh
104
Figure 3.10
Table 3.17 shows the client wise break-up of mutual fund assets as on
31st March 2009. Out of the total assets under management as on 31st March
2009, corporate players contributed more than half (50.92%) of the share and
stood first among all the players. High networth investors and retail investors
also contributed nearly 22 per cent each. And the total share of banks and
Foreign Institutional Investors (FIIs) in the total assets is as low as six per cent.
105
Table 3.18 Client-wise Portfolio Investment as on 31.03.2009
(Rs. In corres)
S. No.
Banks & FIs
Corporates FIIs HNIs Retail Total
1 Equity 1,856
(9.65)
13,174
(6.20)
829
(16.99)
22,514
(24.49)
70,768
(79.73)
1,09,141
(26.15)
2 Debt-oriented 2,661
(13.83)
1,27,387
(59.95)
2,443
(50.04)
56,225
(61.16)
8,042
(9.06)
1,96,758
(47.15)
3 Balanced 52
(0.27)
1,062
(0.50)
1
(0.02)
2,583
(2.81)
7,917
(8.92)
11,615
(2.78)
4 Liquid/ MM 14,496
(75.35)
66,084
(31.10)
1,430
(29.29)
7,060
(7.68)
675
(0.76)
89,745
(21.51)
5 Gilt 106
(0.55)
3,698
(1.74)
- 1,912
(2.08)
231
(0.26)
5,947
(1.42)
6 ETFs 4
(0.02)
212
(0.10)
179
(3.66)
211
(0.23)
62
(0.07)
668
(0.16)
7 Gold ETFs 25
(0.13)
362
(0.17)
- 184
(0.20)
178
(0.20)
749
(0.18)
8 FOF investing
overseas
38
(0.20)
510
(0.24)
- 1,242
(1.35)
888
(1.00)
2,678
(0.65)
Total 19,238
(100.00)
2,12,489
(100.00)
4,882
(100.00)
91,931
(100.00)
88,760
(100.00)
4,17,300
(100.00)
Source : Value Research, Mutual Fund Insight, VI (10) 15 June- 14 July 2009.ETFs does not include gold ETFsHNIs defined as investors investing over Rs. 5 lakhs
106
Figure 3.11
Figure 3.12
107
108
Figure 3.15
109
Table 3.18 reveals client-wise portfolio investment of mutual fund Assets
Under Management as on 31st March 2009. Out of the total assets of Rs. 1,09,141
crore in equity oriented schemes, Rs. 93,282 (85%) are invested by the retail players
and high networth investors. Ditto in the case of balanced funds (90%) and Fund of
Funds investing overseas (80%).
And out of the total assets of Rs. 89,745 crore in liquid and money market
instruments Rs. 80,580 (90%) are invested by the corporate houses, banks and
financial institutions. Corporate and high networth individuals control the bulk of
investments in gilt funds (94%) and debt oriented schemes (93%). Gold in the form
of Gold ETFs, seems to attract corporates (49%) and retail and high networth
investor base (48%) to the same extent.
From the above it is clear that the portfolio investment of mutual fund
assets in equity schemes, balanced schemes is dominated by the retail players
and high networth investors. Investment in liquid and money market
instruments is dominated by the Corporates and Banks, debt oriented and gilt
schemes by the corporates and high networth investors.
110
Summary and Conclusion
The Indian Mutual Fund Industry which started its journey in the year 1964
with the establishment of UTI witnessed four interrelated stages of development.
Towards the end of 1980s winds of change have started blowing to the Indian
economy which attracted the public sector banks and insurance companies into the
mutual fund market from the year 1987. Though the banks and insurance companies
have strong customer base and attracted many investors have failed to reach the
expectations of the investors.
The third phase started in the year 1993 with the entry of private and foreign
players into the mutual fund industry, thereby the competition has grown and the
industry developed in all respects and became strong market in the world. During the
year 1992-94 there was decline in collections by the public sector mutual funds due
to prohibition from launching any assured income scheme and introduction of mutual
fund regulations relating to formation of Asset Management Companies to launch
any new scheme. The last phase in the Indian mutual fund industry started with the
bifurcation of Unit Trust of India into two separate entities as specified undertaking
and the UTI Mutual Fund Limited. At the end of March 2009, there were 35 funds
which manage assets of Rs. 4,17,300 crore under more than 1000 schemes. Out of
this 80 per cent of the Assets Under Management has been contributed by the 30
private sector players.
111
Resources mobilized by mutual funds increased sharply in the eightees and
during the first three years of nintees. Out of the total resources mobilized in 1992-
93, 87 per cent have been contributed by the UTI and the rest by the other public
sector funds. But after deregulation, the scenario has been gradually changed and
from the year 1998-99 onwards more than three-fourth share has been accounted by
the private sector mutual funds. Though the winds are in favour of growth of the
mutual fund industry after 2000-01, public sector has further weakned in terms of
number of schemes and funds mobilization and reached to 15 per cent and 13 per
cent respectively for the year 2008-09. The share of resource mobilization by the
public sector as a percentage of GDP had also decreased due to outflows of the UTI.
Thereafter, the long run bullish market from 2005 to 2008 attracted many investors
which led to improvement in the ratios of both public and private sectors.
The institution wise break up of mutual fund assets and sales reveals that the
share of Indian mutual fund companies, joint venture predominantly Indian
companies have increased their asset base and sales many fold. On the other hand
bank sponsored mutual funds have failed to gain the confidence of investors and
thereby their share had dropped from 68 per cent to 12 per cent to the March 2009.
Assets and sales of Joint venture predominantly foreign relating to private sector
though increased are lagging behind when compared to the Indian and joint venture
predominantly Indian mutual funds. Among public sector, institutions mutual funds
112
sales have also increased. And the mutual fund redemptions have fluctuated in
accordance with the sales concerned.
Due to mergers and consolidations of mutual fund companies, number of
mutual funds under public sector has decreased to 14 per cent and Assets Under
Management has also comedown to 25 per cent due to competition with the private
and foreign players. The unit holding pattern of mutual fund industry also reveals
that 97 per cent of the unit holding accounts are related to the individuals. Private
corporate / Institutional investors constituting 1.39 per cent are contributing nearly
58 per cent of the total assets of the industry. Among the individual investors, private
sector individual investors dominated the industry in the case of investor accounts
and net assets.
Client wise portfolio investment of mutual fund assets reveal that the assets
in equity schemes, balanced schemes are dominated by the retail players and high
networth investors. Investment in liquid and money market instruments are
dominated by the Corporate and Banks and Debt-oriented and Gilt schemes by the
Corporate and High Networth Investors.