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Research Paper

Year: 2018 | Month: June | Volume: 5 | Issue: 6 | Pages: 173-182

Retail Investors’ Take on Mutual Funds and the Regulatory / Fiscal Environment in Which It Operates

Imtiaz Begum. I1, Dr. B. G. Sathya Prasad2

1Research Scholar, Dravidian University, Kuppam, Andhra Pradesh, India.
2Director, G.T. Group of Institution, Bangalore.

Corresponding Author: Imtiaz Begum. I


The mutual fund industry arrived in India in 1963 with the inauguration of Unit Trust of India (UTI), at the initiative of the Government of India and the Reserve Bank of India (RBI). India’s mutual funds’ assets under management had crossed a record INR 20 lakh crores. Investors had been gradually moving from physical assets like gold and real estate to financial investments. Retail investors too, had followed suit. They had been impressed with the affordable opportunities offered by mutual funds. Hence the researcher set out to examine the performance of mutual funds lately. The researcher interacted with 30 retail investors and 30 consultants to collect primary data from them for the purpose. He concluded that goal-driven investment schemes, affordable Systematic Investment Plans, professional management of investors’ money, minimisation of trading costs and assured liquidity in designated schemes drove the retail investors towards mutual funds. Retail investors missed Mutual Funds-Linked Retirement Plans and were sore with the government for extending the holding period in case of debt-oriented mutual funds (for qualifying as ‘long-term capital asset’) to 36 months. The regulator prohibiting distributors from offering investment advice to investors had not gone down well with the retail investors. The researcher asserted that the Mutual Funds-Linked Retirement Plan represented a positive sum game. The country’s economy and all the stakeholders associated with the mutual funds industry would benefit from the Plan. Further, distributors being forbidden from offering investment advice was a measure introduced in haste. In the Indian context, this could not be justified fully. The researcher recommended that the measure be reviewed. It made sense to err on the side of caution where there was a grey area. Further, the Securities Transaction Tax (STT) should not be collected during redemption of units under equity schemes of mutual funds -- it amounted to double levy of STT.

Key words: Designated; Goal-driven; MFLRP; Systematic Investment Plans; RBI; STT; UTI.

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