History Of Mutual Funds In India

Mutual funds have provided retail investors with the opportunity to restructure their financial landscape. It serves as a fascinating vehicle for investment that has played a crucial role in the mobilization of savings from individuals and channeling them into different financial instruments, thereby fostering the creation of wealth and rapid growth in the economy of the country. 

But are you aware of the history of mutual funds in India? It marks a fascinating journey reflecting the facial growth of the country. This article will delve deep into the roots of mutual funds and how it has brought about significant transformations in the oeuvre of finance. 
 

What Is Meant By The History Of Mutual Funds In India?

The history of mutual funds in India entertains the chronological evolution and development of mutual funds as a method of investment in the country. It aims at tracing the inception, growth, and different milestones in the journey of the mutual fund industry in India.

The introduction of UTI ( Unit Trust of India) in the year 1963 marks the beginning and serves as the country's first mutual fund that introduced the concept to retail investors. The central aim is to secure funds from the public and use them for investment in a diversified portfolio of securities to provide investors with attractive returns.
 

A Detailed History Of Mutual Funds In India

Since its inception, the industry has witnessed significant developments and constantly working on broadening the investment opportunities for investors. Below is listed a detailed history of mutual funds in India.

1st Phase (1964 – 1987)

The beginning of the history of mutual funds in India is marked by the establishment of the Unit Trust of India in 1963. UTI dominated the entire phase and, in 1964, introduced its flagship scheme, which grabbed the attention of the public for its safety and assured returns. This first phase primarily laid the foundation of mutual funds in India and encouraged the participation of small investors in capital markets.

2nd Phase (1987 – 1993)

In the second phase, the public sector banks, along with various financial institutions, took entry into the mutual fund market. SBI Mutual Fund, which was established in 1987, stands as the first non-UTI mutual fund in the history of mutual funds in India. The second phase also marks the beginning of new different schemes by UTI as well as other mutual funds, which opened various options for investors.

3rd Phase (1993 – 2003)

The third phase entertains a significant turning point in the history of mutual funds in the country. The government opened the industry of mutual funds for private players in 1993, which led to the entrance of several private-sector AMCs. 

The phase saw increased competition among various mutual fund companies and rapid growth. Moreover, the introduction of SIPs (Systematic Investment Plans) in 1993 laos brought about a revolution in the approach concerning investment, making it more systematic and affordable for retail investors.

4th Phase (February 2003 – April 2014)

Further regulatory reforms are witnessed by the fourth phase brought about by SEBI for improving transparency and strengthening the protection of the investors. There was an increased focus on awareness campaigns and education of the investors. 

The introduction of the New Fund Offer (NFO) process and consolidation of different schemes of mutual funds assist in streamlining the industry and enhancing the experience of the investors.

5th Phase (Current Phase – Since May 2014)

The current phase, or the fifth phase, experiences rapid growth in the mutual fund industry with the introduction of the Direct Plan option that offers investors a cost-effective way to invest in mutual funds. The industry also saw growth in the adoption of various digital platforms for investing and mutual fund portfolio management. 
 

Facts Concerning Mutual Fund Industry Growth

As you have already navigated the growth of mutual funds in India, here are some facts that you must be aware of:

●    The Average Assets Under Management (AAUM) of Indian Mutual Funds Stood at ₹ 44,39,187 crores as of the month of June 2023.
●    The AUM of the mutual funds of India has witnessed steady growth from ₹ 8.11 trillion in June 2013 to ₹44.39 trillion in June 2023, which is five times in the last ten years.
●    The sector’s AUM crossed the ₹10 Trillion milestone for the first time in May 2014, and in November 2020, it crossed the ₹ 30 trillion milestone. 
●    In the month of May 2021, the industry crossed the total folio milestone with 10 crore folios.
●    Currently, the total number of folios in the market stands at 14.91 crore as of 30th June 2023.
 

Future of Mutual Funds

The rapid technological advancements are likely to influence the future of mutual funds in India. This is primarily because, with the inclusion of the latest technology, mutual funds will be able to enhance their operations, offer innovative services and investment products, and bring about an improvement in the experiences of the customers. 

The advancements may also lead to the inclusion of digitalized onboarding processes and robo-advisory services, retaining innumerable benefits for investors. The increase in globalisation may also offer investors access to international markets and invest in a diversified portfolio as well as global assets. 
 

Conclusion

To conclude,  the history of mutual funds In India maps a remarkable journey of evolution in the years since its inception in the mid-20th century. However, it has not received much popularity at first. 

Still, it has gained the attention of investors over the years to finally emerge as one of the most recognised investment vehicles in India. It has also transformed the entire landscape of personal finance and empowered individuals to secure financial freedom in the long run.