An analysis into the Stock Selectivity skill of Indian Fund Managers

Abstract

With the increasing emphasis on domestic savings and improvement in the deployment of investments through markets, the need and scope for mutual fund operation has increased tremendously. The mutual fund is a vehicle that enables millions of small and large savers spread across the country as well as internationally to participate in and derive the benefit of the capital market growth. It is an alternative vehicle of intermediation between the suppliers and users of investible resources. The vehicle is becoming increasingly popular in India and abroad due to higher investor return, relatively lower risk and cost. Thus the involvement of mutual funds in the transformation of Indian economy has made it urgent to view their services not only as the financial intermediary but also as pacesetters as they are playing a significant role in spreading equity culture. In India, the mutual fund industry started with the setting up of the erstwhile Unit Trust of India in 1963. Public sector banks and financial institutions were allowed to establish mutual funds in 1987. Since 1993, the private sector and foreign institutions were permitted to set up mutual funds. In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs 29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India doesn't come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB, and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations