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TitleProject Report on mutual fund.
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                            ssA Summer Training Project Report
Roll No.: 0903070054						MBA- 3rd Sem.
                        
Document Text Contents
Page 62

CHAPTER: 4

MUTUAL FUNDS IN INDIA

In 1963, the day the concept of Mutual Fund took birth in India. Unit Trust of India invited

investors or rather to those who believed in savings, to park their money in UTI Mutual Fund.

For 30 years it goaled without a single second player. Though the 1988 year saw some new

mutual fund companies, but UTI remained in a monopoly position.

The performance of mutual funds in India in the initial phase was not even closer to

satisfactory level. People rarely understood, and of course investing was out of question. But

yes, some 24 million shareholders were accustomed with guaranteed high returns by the

beginning of liberalization of the industry in 1992. This good record of UTI became marketing

tool for new entrants. The expectations of investors touched the sky in profitability factor.

However, people were miles away from the preparedness of risks factor after the liberalization.

The net asset value (NAV) of mutual funds in India declined when stock prices started falling

in the year 1992. Those days, the market regulations did not allow portfolio shifts into

alternative investments. There was rather no choice apart from holding the cash or to further

continue investing in shares. One more thing to be noted, since only closed-end funds were

floated in the market, the investors disinvested by selling at a loss in the secondary market.

The performance of mutual funds in India suffered qualitatively. The 1992 stock market

scandal, the losses by disinvestments and of course the lack of transparent rules in the

whereabouts rocked confidence among the investors. Partly owing to a relatively weak stock

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