A developed economy requires a robust financial market with wide involvement. In 1963, the Government of India and Reserve Bank of India launched the Unit Trust of India (UTI), the country's first mutual fund, with the overarching goal of "encouraging saving and investment and participation in the income, profits and gains accruing to the Corporation from the acquisition, holding, management and disposal of securities." Retail investors now have the chance to rearrange their financial situation thanks to mutual funds. It functions as an intriguing investment vehicle that has been crucial in mobilizing personal resources and directing them toward various financial instruments, thereby promoting wealth creation and the nation's economy's quick expansion. However, do you know the background of mutual funds in India? It represents an intriguing journey that reflects the nation's rapid progress. This essay will examine the history of mutual funds and the profound changes they have brought about in the financial industry.
What Does The Indian Mutual Funds History Mean?
The chronological evolution and development of mutual funds as an investing mechanism in India is explored in the history of mutual funds in that country. Its goal is to chronicle the birth, development, and significant turning points in the history of the mutual fund sector in India. The first mutual fund in the nation to present the concept to retail investors was UTI (Unit Trust of India), which was introduced in 1963. The main objective is to raise money from the general public and utilize it to buy a diverse range of securities that will yield profitable returns for investors.
A Overview Of Mutual Funds' Past In India
The sector has seen tremendous changes since its founding, and efforts are continuously made to increase the range of investment options available to investors. An extensive history of mutual funds in India is shown here.
Phase One (1964–1987)
The founding of the Unit Trust of India in 1963 signifies the start of the mutual fund industry in India. Throughout the whole period, UTI was in the lead. In 1964, the company unveiled its flagship plan, which attracted public attention due to its guaranteed returns and safety. This initial stage mainly served as the basis for mutual funds in India and promoted small investors' involvement in the capital markets.
Phase II (1987–1993)
Public sector banks and other financial institutions entered the mutual fund industry during the second phase. The first non-UTI mutual fund in India's mutual fund history was SBI Mutual Fund, which was founded in 1987. Additionally, new schemes from UTI and other mutual funds began to launch in the second phase, giving investors more options.
Phase Three (1993–2003)
The final section considers a pivotal moment in the nation's mutual fund history. In 1993, the government permitted private participation in the mutual fund market, paving the way for the entry of multiple AMCs in the private sector. During this time, mutual fund businesses saw a surge in competition and saw significant expansion. Furthermore, the 1993 introduction of SIPs (methodical Investment Plans) in Laos revolutionized the way that investments were made, making them more methodical and accessible to regular people.
Phase Four (February 2003–April 2014)
The fourth round of regulatory adjustments implemented by SEBI demonstrates additional efforts to improve openness and fortify investor safety. Campaigns to raise awareness and educate investors received more attention. Simplifying the industry and improving investor experience are two benefits of the New Fund Offer (NFO) procedure and the combination of various mutual fund schemes.
Fifth Phase (As of May 2014, the Current Phase)
Since the launch of the Direct Plan option, which provides investors with an affordable mutual fund investment alternative, the mutual fund sector has experienced significant expansion in the present period, also known as the fifth phase. The industry also witnessed an increase in the use of several digital platforms for managing mutual fund portfolios and investing.
Facts Regarding the Growth of the Mutual Fund Industry
Since you are already familiar with the evolution of mutual funds in India, the following information is essential to know:
- As of June 2023, the average assets under management (AAUM) of mutual funds in India was recorded at ₹ 44,39,187 crores.
- Over the last ten years, the AUM of mutual funds in India has grown steadily, reaching ₹44.39 trillion in June 2023 from ₹8.11 trillion in June 2013.▏ The sector's AUM first crossed the ₹10 trillion milestone in May 2014, and it then crossed the ₹ 30 trillion milestone in November 2020.
- With 10 crore folios, the industry achieved the milestone of 10 crore folios in May 2021.
- As of June 30, 2023, the total number of folios available in the market is 14.91 crore.
Conclusion
Finally, the background of mutual funds illustrates a stunning metamorphosis that India has seen from its founding in the middle of the 20th century. It did not, however, initially enjoy much popularity. Nevertheless, it has drawn interest from investors over time and is now regarded as one of India's most well-known investment vehicles. Additionally, it has completely changed the personal finance environment and given people the ability to achieve long-term financial independence. Retail investors now have the chance to rearrange their financial situation thanks to mutual funds.