The Indian Mutual Fund Industry (eBook)

G.V. Satya Sekhar is Assistant Professor in the Department of Finance at GITAM University, India. He has 18 years of teaching and research experience and has published 30 articles and five textbooks on finance. He is a member of the editorial advisory board for the International Higher Education Teaching and Learning Association, USA. He is also a reviewer for the Journal of Risk Finance.

Cover 1
Contents 6
List of Figures, Tables and Graphs 11
Preface 16
List of Abbreviations and Acronyms 21
1 Introduction 23
1.0 Prologue 23
1.0.1 Need for the study 25
1.0.2 Objectives of the study 25
1.0.3 Hypotheses 26
1.0.4 Scope of the study 26
1.0.5 Data analysis techniques 26
1.0.6 Coverage of the study 27
1.0.7 Plan of the study 27
1.1 Genesis of global mutual funds 28
1.2 The arrival of the modern fund 28
1.2.1 Progress of the global mutual fund industry 29
1.2.2 Global trends in open-ended mutual funds 31
1.3 Genesis of Indian mutual fund industry 36
1.3.1 First phase (1964–1987) 36
1.3.2 Composition of UTI assets 38
1.3.3 Second phase (1987–1993) 38
1.3.4 Third phase (1993–2003) 40
1.3.5 Fourth phase (since February 2003) 41
1.3.6 Trends in assets under management (2003–2009) 42
1.4 Role of Securities Exchange Board of India (SEBI) 44
1.4.1 Restrictions of business activities 45
1.4.2 Major recommendations of the Dave Committee 48
1.4.3 SEBI guidelines during 2007–2008 51
1.4.4 SEBI guidelines, issued on 8 April 2009 53
1.4.5 Circulars issued by SEBI during 2009–2013 57
1.5 Role of Association of Mutual Funds in India (AMFI) 58
1.5.1 Objectives of AMFI 58
1.5.2 AMFI guidelines and norms for intermediaries (AGNI) 59
2 Review of Literature 61
2.1 Performance evaluation methods 61
2.2 Modelling dimensions for performance evaluation 71
2.2.1 Jensen model 71
2.2.2 Fama model 72
2.2.3 Treynor and Mazuy model 72
2.2.4 Statman model 72
2.2.5 Choi model 73
2.2.6 Elango model 73
2.2.7 Chang, Hung and Lee model 73
2.2.8 MM approach 74
2.3 Fund selection behaviour/investors' behaviour 76
2.4 Other relevant studies 78
3 Trends in Resource Mobilization 83
3.0 Introduction 83
3.1 Significance of resource mobilization 83
3.1.1 India's place 84
3.2 Overview of resource mobilization in India 84
3.2.1 Significance of scheme-wise analysis 84
3.2.2 Purchases and sales for various schemes 84
3.3 Trends in resource mobilization 86
3.3.1 Gross resource mobilization 86
3.3.2 Redemption and repurchases 86
3.3.3 Net flows 90
3.4 Resource mobilization and major banks and financial institutions 90
3.4.1 Bank-sponsored institutions 90
3.4.2 FI-sponsored institutions 90
3.5 Factors influencing gross resources mobilization 93
3.5.1 Dependent variables in different models 93
3.5.2 Reasons for considering independent variables for all three models 93
3.5.3 Methodology 94
3.5.4 Regression model of private sector mutual funds 94
3.5.5 Regression model of public sector (other than UTI) mutual funds 94
3.5.6 Regression model of UTI mutual funds 94
3.5.7 Regression equations (after considering independent variables X2 to X8) 106
3.5.8 Impact of independent variables 106
3.6 Findings and conclusions 125
3.6.1 Findings 125
3.6.2 Conclusion 125
4 Investment and Investors' Analysis 128
4.0 Introduction 128
4.0.1 Theoretical background 128
4.1 SEBI guidelines on investment patterns of mutual funds 129
4.2 Restrictions on investments 130
4.3 Instruments of investment 131
4.4 Investment mix 131
4.5 Investment patterns during 1993–2009 131
4.6 Classification of investments by AMFI 133
4.7 Analysis of investments during 2004–2009 133
4.7.1 Investments in 2004–2005 133
4.7.2 Investments in 2008–2009 133
4.8 Classification of investors in mutual funds 135
4.8.1 Corporates or corporate investors 135
4.8.2 Banks and financial institutions (or institutional investors) 135
4.8.3 Foreign institutional investors (FIIs) 135
4.8.4 High net worth individuals (HNI) 136
4.8.5 Retail investors 136
4.9 Mutual fund industry unit holding pattern (2001–2009) 136
4.9.1 Unit holding pattern in 2001–2002 136
4.9.2 Unit holding pattern in 2008–2009 137
4.10 Scheme-wise analysis of investors' composition 141
4.10.1 Liquid/money market funds 141
4.10.2 Gilt funds (funds investing in government securities) 141
4.10.3 Debt-oriented funds 142
4.10.4 Equity-oriented funds 142
4.10.5 Balanced funds 142
4.10.6 Gold exchange-traded funds 144
4.10.7 Exchange-traded funds (other than gold) 144
4.10.8 Fund of funds (investing overseas) 144
4.11 Analysis of investor groups' portfolios 147
4.12 Correlation between investor portfolios 147
4.12.1 Testing of significance 147
4.13 Unit holding pattern 148
4.14 Findings and conclusion 149
4.14.1 Findings 149
4.14.2 Conclusion 150
5 Performance of Mutual Funds 151
5.0 Introduction 151
5.1 Comparison between public sector and private sector 151
5.1.1 Public sector 151
5.1.2 Private sector 152
5.1.3 Comparative analysis 153
5.1.4 Increasing role of private sector during 1994–2013 156
5.2 Leaders and laggards: public vs private sector 156
5.2.1 Number of live schemes by 2008 159
5.2.2 Leaders 159
5.2.3 Laggards 162
5.3 Risk and return analysis 165
5.3.1 Sample size 166
5.3.2 Analysis of peer group consolidated results 166
5.3.3 Analysis of performance 166
5.4 Balanced fund schemes 176
5.4.1 Hypothesis test 180
5.5 Equity schemes 180
5.5.1 Hypothesis test 187
5.6 Floating rate income schemes 187
5.6.1 Hypothesis test 187
5.7 Gilt long term 187
5.7.1 Hypothesis test 191
5.8 Gilt short term 191
5.8.1 Hypothesis test 197
5.9 Income fund 197
5.9.1 Hypothesis test 197
5.10 Liquid funds 197
5.10.1 Hypothesis test 201
5.11 Monthly income plan (MIP) 201
5.11.1 Hypothesis test 206
5.12 Sector funds – FMCG 206
5.12.1 Hypothesis test 206
5.13 Sector funds – Pharma 206
5.13.1 Hypothesis test 206
5.14 Sector funds – Infotech 208
5.14.1 Hypothesis test 208
5.15 Short-term income scheme 208
5.15.1 Hypothesis test 208
5.16 Tax scheme 208
5.16.1 Hypothesis test 214
5.17 Findings and conclusion 214
5.17.1 Findings 214
5.17.2 Conclusion 216
6 Investors' Behaviour: Survey Findings 217
6.0 Introduction 217
6.1 Methodology 218
6.2 Significance test 219
6.3 Demographic profile of the respondents 219
6.4. Analysis of responses 220
6.4.1 Awareness about mutual funds 220
6.4.2 Investment objectives and goals 220
6.4.3 Returns from investments of mutual funds 226
6.4.4 Investment decision 226
6.5 Conclusion 237
Appendices 238
Chapter 1 238
Appendix 1 Different mutual fund options 238
Appendix 2 Global investment company total net assets by type billions of dollars, year-end, 1995–2012 240
Chapter 3 241
Appendix 1 List of top 100 BSE companies 241
Appendix 2 BSE 100 Index Constituent Stocks 245
Chapter 4 248
Appendix 1 Overview of investment by Indian mutual funds (31 December 2009) 248
Appendix 2 Classification of Investments by Mutual funds 250
Appendix 3 Asset under management and folios – Category wise – Aggregate – as on 30 September 2013 252
Chapter 5 254
Appendix: List of the asset management companies 232 254
Notes 255
Glossary 262
Bibliography 286
Subject Index 293
Author Index 295