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Performance Evaluation of Mutual Funds in Indian Capital Market

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Performance Evaluation of Mutual Funds in Indian Capital Market
Mutual funds provide good investment opportunity to investors in general and especially to those investors who have little knowledge about security markets and its intricacies. As financial markets become more sophisticated and complex, investors need a financial intermediary who provides the required knowledge and professional expertise on successful investing. It is no wonder that in the birthplace of mutual funds – the USA – the fund industry has already overtaken the banking industry, more funds being under mutual fund management than deposited with the bank.

The Indian mutual fund industry has already started opening up many of the exciting investment opportunities to Indian investors. We have started witnessing the phenomenon of more savings now being entrusted to the funds than to the banks. Despite the expected continuing growth in the industry, mutual funds are still a new financial intermediary in India.1

1.1 CONCEPT OF MUTUAL FUNDS As an investor, individual prefers to build their portfolio according to their own ability, knowledge and experience. Right or wrong, experienced or inexperienced, they will no doubt continue to operate in this manner. Investor must have the ability to make his own decisions not only on what to buy and when to buy it, but on what to sell and when to sell it and what to hold. It is almost impossible for an investor to be completely independent. He cannot possibly do all his own research and investigation. Along this he has to watch the trends in the stock market. Many people who do not have the inclination, time or knowledge to handle their own investments, mutual funds provide this service to them.2

A mutual fund is common pool of money into which investors place their contributions that are to be invested in accordance with a stated objective. The ownership of the fund thus joint or ‘mutual’, the fund belongs to all the investors. A single investor’s ownership of the fund is in the same proportion as the amount



References: 1. Anjaria, D.C., and Dhaivat Anjaria (2001), Association of Mutual Funds in India – Mutual Fund Test, Workbook, Second Edition, December, p.3. 2. Jayadev, M., (1998), Investment Policy and Performance of Mutual Funds, Kanishka Publishers, New Delhi, pp. 61-62. 3. Anjaria, D.C., and Dhaivat Anjaria (2001), Association of Mutual Funds in India – Mutual Fund Test, Workbook, Second Edition, December, p.5. 6. Sadhak, H., (1998), Mutual Funds in India – Marketing Strategies and Investment Practices, A Division of Sage Publications, New Delhi, pp. 40-47. 8. The Tribune, Implications of UTI Bailout, December 1, 2002. 11. Jayadev, M., (1998), Investment Policy and Performance of Mutual Funds, Kanishka Publishers, New Delhi, pp. 65-70. 12. Gangadhar, V., (1992), “The Changing Pattern of Mutual Funds in India,” The Indian Journal of Commerce, Vol. No. XLV, Part 1, No.170, pp. 125-128. 13. Kothari Vinod, (1986), Lease Financing and Hire Purchase, Merchant Banking, Mutual Funds, Factoring and Venture Capital, Wadhwa and Company, Vagpur, pp. 545-547.

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