The Evolution of Mutual Funds

About Mutual Funds

Mutual Funds

Common assets truly caught the public’s consideration during the 1980s and 90s when shared reserve speculation hit record and financial specialists saw amazing returns. Notwithstanding, pooling resources for venture purposes has been around for quite a while.

The Evolution of Mutual Funds

The development of Unit Trust of India denoted the advancement of the Indian shared store industry in the year 1963. The essential target around then was to draw in the little financial specialists, and it was put forth conceivable through the aggregate attempts of the Government of India and the Reserve Bank of India. The historical backdrop of the shared store industry in India can be better perceived separated into the accompanying stages:

Stage I. Foundation and Growth of Unit Trust of India – 1964-87

Unit Trust of India appreciated total imposing business model when it was built up in the year 1963 by a demonstration of Parliament. UTI was set up by the Reserve Bank of India and it kept on working under the administrative control of the RBI until the two were de-connected in 1978 and the whole control was moved to the hands of the Industrial Development Bank of India (IDBI).

Phase II. The entry of Public Sector Funds – 1987-1993

The Indian mutual fund industry witnessed a number of public sector players entering the market in the year 1987. In November 1987, the SBI Mutual Fund from the State Bank of India became the first non-UTI mutual fund in India. SBI Mutual Fund was later followed by Canara Bank Mutual Fund, LIC Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund, GIC Mutual Fund, and PNB Mutual Fund.

Phase III. The emergence of Private Sector Funds – 1993-96

The permission is given to private sector funds including foreign fund management companies (most of them entering through joint ventures with Indian promoters) to enter the mutual fund industry in 1993, providing a wide range of choice to investors and more competition in the industry

.Phase IV. Growth and SEBI Regulation – 1996-2004

The shared store industry saw hearty development and stricter guideline from the SEBI after the year 1996. The assembly of assets and the quantity of players working in the business arrived at new statures as speculators began demonstrating more enthusiasm for shared assets.

Stage V. Development and Consolidation – 2004 Onwards

The business has additionally seen a few mergers and acquisitions as of late, instances of which are the securing of plans of Alliance Mutual Fund by Birla Sun Life, Sun F&C Mutual Fund, and PNB Mutual Fund by Principal Mutual Fund. All the while, more worldwide shared reserve players have entered India like Fidelity, Franklin Templeton Mutual Fund and so on.

Each mutual fund has a specific stated objective

The fund’s objective is laid out in the fund’s prospectus, which is the legal document that contains information about the fund, its history, its officers, and its performance.

Some popular objectives of a mutual fund are –

Fund Objective What the fund will invest in
Equity (Growth) Only in stocks
Debt (Income) Only in fixed-income securities
Money Market (including Gilt) In short-term money market instruments (including government securities)
Balanced Partly in stocks and partly in fixed-income securities, in order to maintain a ‘balance’ in returns and risk

Tax benefits on Investment in Mutual Funds

1) 100% Income Tax exemption on all Mutual Fund dividends

2) Equity Funds – Short-term capital gains are taxed at 15%. Long-term capital gains are not applicable.
Debt Funds – Short-term capital gains are taxed as per the slab rates applicable to you. Long term capital gains tax to be lower of – 10% on the capital gains without factoring indexation benefit and 20% on the capital gains after factoring indexation benefit.

3) Open-end funds with equity exposure of more than 65% (Revised from 50% to 65% in Budget 2006) are exempt from the payment of dividend tax for a period of 3 years from 1999-2000.

Note: Equity Funds are those where the investible funds are invested in equity shares in domestic companies to the extent of more than 65% of the total proceeds of such funds.


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