Submitted by

012EPGP JAGTAP DESHAMUKH PRAVIN ARUN

013EPGP JAYESH JAGTAP
014EPGP MANISH

Overview of Mutual Fund Industry in India

A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money collected & invested by the fund manager in
different types of securities depending upon the objective of the scheme. These
could range from shares to debentures to money market instruments. Mutual Fund
is the most suitable investment for the common person as it offers an opportunity
to invest in a diversified, professionally managed portfolio at a relatively low cost.
Anybody with an investible surplus of as little as a few thousand rupees can invest
in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and
strategy.
The Indian Mutual fund industry has witnessed considerable growth since its
inception in 1963. The assets under management (AUM) have surged to Rs 4,173 bn
in Mar-09 from just Rs 250 mn in Mar-65. In a span of 10 years (from 1999 to 2009),
the industry has registered a CAGR of 22.3%, albeit encompassing some shortfalls
in AUM due to business cycles.
The Indian Mutual fund industry that started with traditional products like equity
fund, debt fund and balanced fund has significantly expanded its product portfolio.
Today, the industry has introduced an array of products. The most important trend
in the mutual fund industry is the aggressive expansion of the foreign owned mutual
fund companies and the decline of the companies floated by nationalized banks and
smaller private sector players

Overview of Sundaram Asset Management Company

Sundaram Asset Management Companyis the investment manager to
Sundaram Mutual Fund. Founded 1996, it is one of the largest and well
established fund houses in the country. Sundaram Mutual is a fully owned

IIM INDORE EPGP 2014-2015

subsidiary of one of India's oldest NBFCs - Sundaram Finance Limited.Fund

basket consists of 12 well researched and class leading equity funds and 4
products in the fixed income category.
Key Strengths:

Good Brand image across larger geography

Robust and transparent investment process
Basket of clearly defined products
Emphasis on research
Customer centric processes

The average Assets under Management of Sundaram MutualFund schemes

for the year 2013-14 was Rs. 15,248.25 Crs. compared to Rs. 13,573.76 Cr.
for 2012-13, an increase of12.33%. The closing AUM of Sundaram Mutual
Fund schemes was Rs. 15,193.17 Cr. as at March 31, 2014 compared to Rs.
12,873.28 Cr. as at March 31, 2013, representing a growthof 18.02
%.Sundaram Gilt Fund, Sundaram Ultra Short Term Fund andSundaram Select
Debt Short Term Asset Plan were given 5-starratings by Value Research.
Company has a total of 44 branches as at the year-end ofwhich 31 branches
were located outside the top 15 cities as defined by SEBI.

PEST Analysis
Political Analysis

In India, SEBI (Mutual Fund) Regulations, 1996 regulates the structure of

mutual funds. And SEBI chief is appointed by Government of India in
consultation with ministry of Finance. This makes rules and regulation in
mutual funds industry subjected to politicians in the power and along with
change in government there is danger of reversal of rules of regulations.

Mutual funds in India are constituted in the form of a Public Trust created
under The Indian Trusts Act, 1882. All the AMCs are subsidiaries of trust. In
order to launch an AMC, trust needs to be formed under which the AMC
operates. Every decision is approved or disapproves by trust.

IIM INDORE EPGP 2014-2015

Stability of Government
The stability of the government and peoples faith into it acts as an important
factor. The stablegovernment encourages people to invest into such type of
financial instruments. Return in equity markets depends on political stability
in the country. Returns of AMC are directly linked with equity returns.

The impact of foreign investment.

The foreign investment that comes into the country either in the form
of FDI or FII affects positively to equity markets and currency markets. This
improves the return in equity markets creating positive environment for
investment in AMCs. Investment in any country is largely dependent on
political stability of the country. In the current scenario, due to political

IIM INDORE EPGP 2014-2015

stability offered by current BJP led Indian government, huge foreign

investment has been made in Indian market and it have affected positively to
currency and equity market leading to increase in subscription of AMCs

Forced renegotiation of contracts

Due to political intervention, liberty of AMCs to work in many areas is
restricted. Frequent changes in rules and regulations by government
would also lead to deterioration of confidence of public in general.

FDI Policy.
Government of India has rules and legal regulations which dictates
ownership of MFs, these rule and regulations affects number of new
players entering the market.

SEBI and RBI Policies

Different policy decision by SEBI and RBI directly or indirectly affect the
mutual fund industry. For example recently SEBI increase in the
minimum net-worth requirement of the AMCs from Rs. 10 cr. to Rs.50
cr. This would limit the number of new entrant into this industry.
SEBI has introduced tax benefits allowed on mutual fund schemes (for
example investment made in Equity Linked Saving Scheme (ELSS) is
qualified for tax deductions under section 80C of the Income Tax Act)
also have helped mutual funds to evolve as the preferred form of
investment among the salaried income earners.

Economic Analysis

India's population
India's population is young, with 54% under the age of 25 and 80%
under 45 and the percentage of working population is rising rapidly.
This demographic condition offers huge possibility for growth. Also
young population is more aware of financial investment opportunities
which makes them more likely to invest in AMCs.

Indian Stock Market:

IIM INDORE EPGP 2014-2015

If we see the position of BSE Sensex as compared to other major

indexes in the world then we find that BSE has been the best
performer. In the last year BSE and NSE are top performing markets in
the world which makes investment more lucrative.

India growth Potential:

India is potential 'Services Capital' of the World-With services becoming
increasingly tradable, India is well placed in terms of costs and skill
sets and over the past 13 years. This would lead to increase in foreign
money into India and it would increase money flow into AMC.

Social Analysis

Globalization:
Due to globalization, societies are expanding leading to increase in
reach of AMCs.

Improvement in Standard of living of population:

As peoples standard of living increases, they have more money to
spend. This would lead to increase in availability of funds for AMCs

Saving rate of Indian population:

Saving rate in India is one of the highest in the world. This gives huge
cash reserves in the hands of Indian population which could be
invested in AMC.

To fund future needs, to meet contingencies, to maintain same standard of

living after retirement: As peoples standard of leaving increases, people tend
to invest in different financial instruments to create funds for contingencies
and to maintain same standard of leaving after retirement.

Technological Analysis

Accessibility:
Due to high penetration of technology accessibility of these investment
opportunity is increasing

Cost:
Due to technological improvement over the years, cost of investing has
decreased and it is encouraging normal population to increase more
into AMCs. Previously cost of investment was one of the deterrent to

IIM INDORE EPGP 2014-2015

invest into the market but technological improvements have reduced

this cost substantially.

Security:
Due to technological improvements investment in AMCs has become
more secure. Previously many people were reluctant to invest into AMC
due to security reasons but with the advent of technology people feel
more secure about their investment.

Integration with global financial market.

Technological improvement has led to integration of Indian financial
market with Indian market, leading to improved opportunist for growth.
The outburst of technology has made it possible for the foreign
companies to look for Indian market and returns associated with it.

Accessibility to rules and legal framework

Increase in accessibility to rules and regulation has improved
investment related knowledge of Indian population.

IIM INDORE EPGP 2014-2015

PEST analysis highlights

T
P
E
S
c
o
e
l
o
c
in
h
t
o
a
n
i
lm
o
lic
a
c
A
o
l
a
n
g
l
ia
lA
c
n
A
y
a
a
n
ls
l
ia
ly
s
A
s
y
n
i
s
a
lis
s
y
s
i
s

IIM INDORE EPGP 2014-2015

Porters Five Forces Analysis

B a r g a in i
ng
pow er
of
T Sh ur ep ap i e r
t of s
s u b s ti
tu te

R iv a lr y
am oung
e x is t in g
fi r m s

B a rg a n
in g
pow er
of
b u y e rs

T h re a t
of new
E x tra n
ts :

Rivalry amongst existing firms

IIM INDORE EPGP 2014-2015

Government limits competition

Government policies and regulations can dictate the level of competition within the
industry. When they limit competition, this is a positive for Mutual fund industry in
India. This has a significant impact.
Large industry size
Large no. of players in industry and a very small investor base infuses a great
competitiveness among all players to steal market share from each other. Large no.
of industry players is a positive for Mutual fund industry in India whereas the low
penetration and small investor base a curse for industry and its players.
Fast industry growth rate
When industries are growing revenue quickly, they are less likely to compete,
because the total industry size is also growing. The only way to grow in slow growth
industries is to steal market-share from competitors. Fast industry growth positively
affects Mutual fund industry in India.
Exit barriers are low
When exit barriers are low, weak firms are more likely to leave the market, which
will increase the profits for the remaining firms. Low exit barriers are a positive for
Mutual fund industry in India.

Threat of Substitutes
Inferior Substitute products
An inferior product means a customer is less likely to switch from Mutual fund
industry in India to another product or service. Since the product is market based ad
there is no guarantee of returns FDs are most sought after product.
Large number of substitutes
A large number of substitutes mean that customers can easily find other products or
services that fulfil their needs. Large no. substitutes are a negative for Mutual fund
industry in India.
Substantial product differentiation
When products and services are very different, customers are less likely to find
comparable product or services that meet their needs. This is a positive for Mutual
fund industry in India.
High cost of switching to substitutes
IIM INDORE EPGP 2014-2015

Limited number of substitutes means that customers cannot easily switch to other
products or services of similar price and still receive the same benefits. High
switching costs positively affect Mutual fund industry in India.

Threat of New Competitors

High capital requirements
High capital requirements mean a company must spend a lot of money in order to
compete in the market. High capital requirements positively affect Mutual fund
industry in India.
Recently SEBI increase in the minimum net-worthrequirement of the AMCs from Rs.
10 cr. to Rs.50 cr. This limits number of new entrant into the market.
High sunk costs limit competition
High sunk costs make it difficult for a competitor to enter a new market, because
they have to commit money up front with no guarantee of returns in the end. High
sunk costs positively affect Mutual fund industry in India.
Strong distribution network required
Weak distribution networks mean goods are more expensive to move around and
some goods dont get to the end customer. The expense of building a strong
distribution network positively affects Mutual fund industry in India.
Advanced technologies are required
Advanced technologies make it difficult for new competitors to enter the market
because they have to develop those technologies before effectively competing. The
requirement for advanced technologies positively affects Mutual fund industry in
India.
Industry requires economies of scale
Economies of scale help producers to lower their cost by producing the next unit of
output at lower costs. When new competitors enter the market, they will have a
higher cost of production, because they have smaller economies of scale.
Economies of scale positively affect Mutual fund industry in India.
Geographic factors limit competition
If existing competitors have the best geographical locations, new competitors will
have a competitive disadvantage. Limiting geographic factors positively affect
Mutual fund industry in India.
IIM INDORE EPGP 2014-2015

10

Bargaining Power of Suppliers

Large number of substitute inputs
High levels of competition among suppliers acts to reduce prices to producers. This
is a positive for Mutual fund industry in India.
High competition among suppliers
A low concentration of suppliers means there are many suppliers with limited
bargaining power. Low concentration of suppliers positively affects Mutual fund
industry in India.
Low concentration of suppliers
The more diverse distribution channels become the less bargaining power a single
distributor will have. This positively affects Mutual fund industry in India
Diverse distribution channel
When inputs are not a big component of costs, suppliers of those inputs have less
bargaining power. Low cost inputs positively affect Mutual fund industry in India
Inputs have little impact on costs
When inputs are not a big component of costs, suppliers of those inputs have less
bargaining power. Low cost inputs positively affect Mutual fund industry in India
Volume is critical to suppliers
When suppliers are reliant on high volumes, they have less bargaining power,
because a producer can threaten to cut volumes and hurt the suppliers profits. This
can positively affect Mutual fund industry in India.
Low cost of switching suppliers
The easier it is to switch suppliers, the less bargaining power they have. Low
supplier switching costs positively affect Mutual fund industry in India.

Bargaining Power of Customers

Buyers require special customization
When customers require special customizations, they are less likely to switch to
producers who have difficulty meeting their demands. Buyer customization
positively affects Mutual fund industry in India
Low buyer price sensitivity

IIM INDORE EPGP 2014-2015

11

When buyers are less sensitive to prices, prices can increase and buyers will still
buy the product. Inelastic demand positively affects Mutual fund industry in India
Low dependency on distributors
When produces have low dependence, distributors have less bargaining power. Low
dependency positively affects Mutual fund industry in India
Product is important to customer
When customers cherish particular products they end up paying more for that one
product. This positively affects Mutual fund industry in India.
Large number of customers
When there are large numbers of customers, no one customer tends to have
bargaining leverage. Limited bargaining leverage helps Mutual fund industry in India
Limited buyer choice
When customers have limited choices they end up paying more for the choices that
are available. Limited buyer choices are a positive for Mutual fund industry in India.

IIM INDORE EPGP 2014-2015

12