Performance of mutual funds in India

A mutual fund is a pool of money contributed by individuals who have similar financial goals. Mutual fund collects the savings from small investors, and reinvests them in various securities such as equities, debentures, bonds and money market investments. Thus, Mutual funds are corporations, which pool funds by selling their own units and reduce risk diversification. Till 1986 the UTI was the only mutual fund organization in India. From thereon, public sector banks and insurance companies were allowed to set up subsidiaries to undertake mutual fund business. From 1992 onwards the mutual fund was opened to the private sector. The functions of mutual funds are similar to those of other financial intermediaries. Some of the important advantages of mutual funds are, channelizing savings for investment, providing better yield, offering tax benefits, introducing flexible investment schedule, providing greater liquidity, promoting industrial development, supporting capital market, keeping the money market active and so on. Mutual funds put forward a way out to investors to approach maximum number of financial securities and get a well-diversified portfolio. This study was conducted to analyze the performance of different types of mutual funds in India. The study has thoroughly analysed and evaluated the performance of mutual funds under categories like equity funds and income funds, and concluded that equity funds outperform income funds. These funds were further classified into broker backed and institutional backed funds for detail analysis. Findings showed that within equity funds, broker backed category shows better performance than institutional funds. On the other hand, among income funds, institutional funds are outperforming broker backed funds.