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Premium member Presentation Transcript PowerPoint Presentation: CHALLENGES FACING INDIAN MUTUAL FUND SECTOR Presented By: W.UMESH NANDA ROLL NUMBER-24PowerPoint Presentation: TOPIC COVERED OVERVIEW OF MUTUAL FUND HISTORY OF MUTUAL FUND ASSOCIATION OF MUTUAL FUNDS IN INDIA DRAWBACKS OF MUTUAL FUNDS SOME OF THE KEY CHALLENGES AT PRESENT PROBLEMS OF MUTUAL FUND INDUSTRY LATEST TRENDS OF MUTUAL FUNDS IN INDIA CONCULSION BIBLIOGRAPHYPowerPoint Presentation: OVERVIEW OF MUTUAL FUND A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized is shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.HISTORY OF MUTUAL FUND: HISTORY OF MUTUAL FUND 1964-1987 (Phase I) – Growth of Unit Trust of India 1987-1993 (Phase II) – Entry of Public Sector Funds 1993-1996 (Phase III) – Emergence of Private Funds 1996-1999 ( Phase IV) – Growth and SEBI Regulation 1999-2004 (Phase V) – Emergence of large & uniform Industry 2004 onwards (Phase VI) – Consolidation and Growth.PowerPoint Presentation: ASSOCIATION OF MUTUAL FUNDS IN INDIA Association of Mutual Funds in India (AMFI) was incorporated on 22nd August, 1995. (AMFI) modeled on the lines of a Self Regulating Organization (SRO) with a view to 'promoting and protecting the interest of mutual funds and their unit-holders, increasing public awareness of mutual funds, and serving the investor’s interest by defining and maintaining high ethical and professional standards in the mutual funds industry' Association of Mutual Funds India has brought down the Indian mutual fund industry to a professional and healthy market with ethical lines enhancing and maintaining standards. It follows the principle of both protecting and promoting the interests of mutual funds as well as their unit holders.PowerPoint Presentation: No Guarantees : No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone who invests through a mutual fund runs the risk of losing money. Fees and commissions : All funds charge administrative fees to cover their day-to-day expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial consultants, or financial planners. Even if you don't use a broker or other financial adviser, you will pay a sales commission if you buy shares in a Load Fund. Taxe s: During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income you receive, even if you reinvest the money you made. Management risk : When you invest in a mutual fund, you depend on the fund's manager to make the right decisions regarding the fund's portfolio. If the manager does not perform as well as you had hoped, you might not make as much money on your investment as you expected. Of course, if you invest in Index Funds, you forego management risk, because these funds do not employ managers DRAWBACKS OF MUTUAL FUNDSPowerPoint Presentation: There are many Challenges Facing Mutual Funds which is of prime concern to the people who have an investment spree. People find mutual fund investment so much interesting because they think they can gain high rate of return by diversifying their investment and risk. But, in reality this scope of high rate of returns is just one side of the coin. On the other side, there is the harsh reality of highly Fluctuating Rate of Returns. Though there are other disadvantages also, this concern of fluctuating returns is most possibly the greatest challenge faced by the mutual fund . THE ISSUE OF FLUCTUATING RETURNS/ VOLATILE STOCK PRICE MOVEMENT. I n spite of being a diversified investment solution, mutual funds investment in no way guarantees any return. If the market prices of major shares and bonds fall, then the value of mutual fund shares are sure to go down, no matter how diversified the mutual fund portfolio be. It can be said that mutual fund investment is somewhat lower risky than Direct Investment in stocks. But, every time a person invests in mutual fund, he unavoidably carries the risk of losing money. CHALLENGES FACING INDIAN MUTUAL FUND SECTORPowerPoint Presentation: Over Diversification - In order to diversify the investment, many times the mutual fund companies get involved in Over Diversification . The risk of holding a single financial security is removed by diversification. But, in case of over diversification, investors diversify so much that many time they end up with investing in funds that are highly related and thus the benefit of risk diversification is ruled out. Uncertainty : Key markets like Europe are still in the throes of a crippling recession. As recent data revealed, the UK has slipped back into a recession. Given this environment, Indian IT companies are finding it tough to get a fix on deal visibility and hence struggling with their results guidance. Slow in decision making: Decision making on deals by the clients is likely to be slow for next quarters (which TCS and Wipro indicated in the last quarter of 2011-12 in the post-results commentary) given in the uncertain economic environments in large markets like US and Europe. Tough competition: Indian companies are now fighting with MNC giants like Accenture and IBM even for smaller contracts, which the latter would not go after earlier as aggressively. Further, clients are demanding new pricing models , a presence across geographies and greater sharing of risk from Indian vendors. Contracts are being renegotiated regularly. SOME OF THE KEY CHALLENGES AT PRESENTPowerPoint Presentation: Problems related to structure The Govt. of India should consider enacting a separate comprehensive Mutual Funds Act and clearly spell out rights, duties and obligations of the various constituents of mutual fund to provide a uniform regulatory framework and to create a level playing field for all the mutual funds in the industry including UTI. Problems related to the investors The queries received from the investors are promptly attended by all the private sector mutual funds. There are delays in attending queries by the transfer agents in case of UTI due to large number of queries received by them . Problems related to working There are several problems related to UTI such as non-disclosure of portfolio, inter scheme transfer of funds, lack of professional fund managers, sale & repurchase of units of US-64 at prices not related to its NAV, bureaucratic working, etc. AMFI has constituted committees on valuation, best practices and credit policy and working groups on valuation of gilt-securities, standardization of disclosure, pensions, etc. to ensure uniform working and disclosure practices. Problems related to performance The mutual funds are bound to invest the funds as per their investment objectives of each scheme published in the offer document. After the issue is over, it becomes the mandate and the mutual funds have no choice to invest the funds in other securities, which can provide higher returns. PROBLEMS OF MUTUAL FUND INDUSTRYPowerPoint Presentation: LATEST TRENDS OF MUTUAL FUNDS IN INDIA The recent trends since last year clearly suggest that the average investors have lost money in equity. People have now started opting for portfolio managers. Entrance of multinational companies. Professional expertise to manage funds worldwide. Mutual funds in India now offer a wide range of schemes to choose. Mutual funds are turned to be the most preferred choice worldwide for both small and big investors due to their numerous advantages which include diversification, professional management, potential of returns, efficiency and easy to use.PowerPoint Presentation: The challenges specific to the Indian mutual fund sector are those common to emerging markets stocks in general, which is that these companies depend heavily upon international growth. Unfortunately the outlook for international growth is not very good right now. In general, emerging market mutual funds are highly correlated to the developed markets, but even more volatile. When developed markets go up, emerging markets will usually go up even more; when developed markets go down, emerging markets will go down even more. This isn't a hard and fast rule, obviously, but still valid most of the time and for the foreseeable future .PowerPoint Presentation: BIBLIOGRAPHY http ://www.authorstream.com http ://www.slideshare.net http ://www.hdfcsec.com You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.