The evolution of Mutual Funds in India
Mutual funds have been one of the most buzzing investment options these days. Apart from the much-needed flexibility and liquidity, they allow you to gain inflation-beating returns on your investment. Moreover, you can start investing in mutual funds through a Systematic Investment Plan (SIP) of as low as Rs. 500 per month and build a corpus for your future.
And with the emergence of the internet and smartphones, you can now invest in mutual funds online by just downloading the Tata Capital Moneyfy app. But, before you begin your mutual fund investment journey, let’s learn about the history and evolution of mutual funds in India.
When did the first mutual fund start?
The concept of mutual funds started in Europe in the early 1770s. A Dutch merchant named Mr. Adriaan Van Ketwich invented the world’s first mutual fund in 1774. He took money from several investors and pooled it into a diversified fund of bonds. And after the success of his first fund, Van Ketwich started his second mutual fund in 1779.
Evolution of the mutual fund industry in India
The concept of mutual funds was introduced in India only in 1963 with the formation of the Unit Trust of India (UTI). Though it started as a collaboration between the Reserve Bank of India (RBI) and the Government, the latter soon delinked itself from the day-to-day operations of the UTI.
The evolution of mutual funds in India can be segregated into four distinct phases:
- Phase I (1964–1987)
The first phase of the mutual funds’ evolution in India started with the setting up of the UTI in July 1964. The first product launched by the UTI was Unit64, which became hugely popular in India and attracted a large number of investors at that time.
In 1971, the UTI launched the Unit Linked Insurance Plan (ULIP) for the first time in India. And after that, UTI launched several mutual fund schemes till 1986. In 1987, the total Assets Under Management (AUM) under the UTI was worth Rs. 6,700 crores.
- Phase II (1987-1993)
By the end of 1987, the mutual fund industry in India had developed into a significant one. As a result, several non-UTI, public sector mutual funds started entering the market in 1988. These were mainly created by public banks, Life Insurance Corporation (LIC), and General Insurance Corporation (GMC).
In 1993, the cumulative AUM of all mutual fund houses in India went up to a whopping Rs. 44,000 crores.
- Phase III (1993-2003)
After the huge success of public-sector mutual funds in 1993, private companies also started to enter the scene. Along with national players, many foreign Asset Management Companies (AMCs) also entered the Indian market during this phase. At the start of 2003, there were 33 AMCs in India with a cumulative net worth of Rs. 1,21,805 crores.
- Phase IV (2003–present)
The Indian mutual fund industry witnessed several mergers and acquisitions after 2003. This period is known as the consolidation phase for the industry. Though in 2009, many investors incurred huge losses due to the global recession, the mutual fund industry entered the development phase after 2014. And since then, it has evolved into an industry worth Rs. 23 lakh crore.
Conclusion
The mutual fund industry was established in 1963 in India but has evolved rapidly since then. With more encouragement from the Government and investors, it is expected to grow by multiple times in the upcoming years.
With Tata Capital Moneyfy App, you can invest and switch between mutual funds seamlessly. This app can help you start a SIP or invest through lump sums.
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