Mutual fund vs Mercedes Debate: Know what are MFs, its history, market share, other key details

New Delhi: Santosh Iyer, the incoming head of Mercedes' India operations, stated in a recent interview with Times of India that investor awareness of systematic investment plans (SIPs) in mutual funds (MFs) has been driving discretionary money towards SIPs and decreasing sales of luxury vehicles in India. But what attracts youths to invest in SIPs, the history of mutual funds and state-wise investment.

History of Mutual funds

In 1963, the first mutual fund in the country was started in the name of Unit Trust of India (UTI). Afterward, it was run by the Reserve Bank of India (RBI). The responsibility of UTI was handed over to the Industrial Development Bank of India (IDBI) in 1978 from RBI. Till 1988, the corpus of mutual funds was Rs 6700 crore. (Also Read: How to add or change nominee in your Mutual Fund: Here's step-by-step guide)

Apart from UTI, from 1987 to 1993, the market experiences many other public sector mutual funds. The business of mutual funds reached 47000 crores in these 6 years. The private sector was allowed to open mutual funds from 1993 to 2003. As of January 2003, there were 33 mutual funds managing Rs 1.21 lakh crore in the country. (Also Read: What happens to the money after PPF account holder's death? Here's the detail)

Mutual fund market today

Today more than 5.9 crore SIP accounts are running in India. SIP is the best way to invest in Mutual Funds. Investing in the stock market with mutual funds is easier and less risky. In 2006, the mutual fund market of 2.3 lakh crores has now increased to more than 39 lakh crores. In the last 16 years, people's investment in mutual funds has increased 16 times.

 

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State-wise status of the mutual fund market

Maharashtra with 41.6 percent is the largest investor in mutual funds. At present, more than half of the country's investment comes only from Maharashtra and Delhi which contributes 8.5 percent. It is followed by Karnataka (7 percent), Gujarat (6.9 percent), West Bengal (5.2 percent), Uttar Pradesh, and Tamil Nadu (4.4 percent).

States with less than 1 percent market share in the country's mutual fund market are Jammu and Kashmir (0.1 percent), Himachal Pradesh (0.2 percent), Uttarakhand (0.4 percent), Assam (0.5 percent), Chhattisgarh (0.6 percent) and Bihar (0.9 percent).

 

There are different ways to invest in mutual funds. Equity is the most preferred among Indians. The mutual fund has a total capital allocation of 46 percent through growth and equity. Apart from this, there is a 16 percent investment in liquid funds. A liquid fund is a type of deposit fund in which interest is more than the savings account. Rest 19 percent of the money is invested in debt-oriented schemes.

ETF (Exchange Traded Fund) is also the easiest way to invest in the stock market. 12 percent of the capital is invested in this segment of mutual funds.