Future of Mutual Funds in India

As a force to be reckoned with, India has been making an impact on the world financial market with its intense growth and aggressiveness. Mutual Funds is expected to continue its upward climb as more and more start to invest and become financial-savvy in India.

The Mutual Fund in India started as early as 1963, and since then, has grown in leaps and bounds over a period of what one would consider as 4 waves. In each period (or wave) the country has implemented changes for the better which has made Mutual Fund an ideal avenue for those interested in investing, and those who are knowledgeable about investing but prefer to stick to the Mutual Fund portfolio.

Patterned after the British Mutual Fund, this kind of investment has several advantages which makes it one of the most promising form of investment in India today.

One, it is affordable. For many, this is the clincher because not everyone has a ton of money to set aside for investment. In a growing economy like India, it is actually the small investor that makes a big difference in the market.

Two, there are several kinds of schemes available for an investor. This makes it an easy choice because he can select an open-ended, close-ended, or balanced scheme which allows him some control over his funds.

Three, the tax benefits were adjusted to a low 10.5% for open-ended Mutual Fund income. Furthermore, there are additional tax benefits for Hindu undivided families and individuals, as well as exemption from Wealth and Gift taxes.

Four, investors are fully protected by extensive regulations that aim to protect them from unscrupulous fund managers.

These make the prospects for Mutual Fund investments very appealing for the regular guy on the street who is interested in setting aside a safety net for his future. Still, many Indians fear that the risk of investment and prefer to hold on to their cash. The main reason why it is risky for investing anywhere is inflation, wherein your money cannot compete with the rising prices and the decreased purchasing power. The solution to this is to concentrate on AAA stocks and to diversify as much as possible. As they say, “don’t put all your eggs in one basket.”

As of 5 years ago, the rate of growth of Mutual Funds is about 9%, and expectations for 2010 is that the growth rate doubles. Naturally, this will depend on all factors, both within the financial sector and on the part of the government.

However, the fact that multinationals are coming into India and seeing investment opportunities worth their time is a good indication of how the future of Mutual Funds look for this country.

Taking the time to study and understand the entire situation, the players and the different portfolios will allow an investor to make a good business decision on where to invest. At the moment, the buzzword is Mutual Funds.

Quote of the Day:

We believe that the interest rates are going to rise. In months from April – September, the corporate bond issuance is very less and government is the only borrower. With uncertainty prevailing on macro-economic front, we believe that for a period of 5-6 months going ahead, the yields (10 yr benchmark GoI yield) could remain range bound 6.50% to 7.50%.
But in second half of the financial year, issuances from government and the private sector heat up. With huge government borrowing program for current FY, we see a risk of government crowding out private sector borrowing. We believe that by Sept – Dec this year, the yields (10 yr benchmark GoI yield) could increase from 6.50% to 8%. - Mr. Ritesh Jain

Conclusion:
The future of the Mutual Funds market in India is showing much promise, and this is reflected by the increased economic and financial activities in the country. As an emerging tiger, India is proving its worth, and investors are coming in.

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