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Indian Mutual Funds to be Powered by PSUs
Monday, May 21, 2007

Mutual funds in India would be further energized with investment from major public sector undertakings following the Indian government’s approval which came in last week. Lifting the restrictions on PSU investments in mutual funds after 8 years, the money held by asset management companies is expected to swell to an astounding Rs. 4 trillion, if the PSUs were to invest even a conservative 10% of their funds.

Currently at Rs. 3.5 trillion, total assets under management by the mutual fund industry in India has grown by 51% over the last one year. Almost two-thirds of these assets are built from equity and fixed income schemes, and further invested in stable instruments like government securities and bonds.

The government may issue directives to PSUs to invest more heavily in fixed income schemes, while curtailing their equity exposure. Indian mutual funds are on a roll with new participants and products in the market. Mutual funds in India have performed more successfully than their counterparts around the globe, bagging 8 of the top10 ranks over the last decade.

Over the last 5 years, Indian mutual funds figure amongst the top 7 in the world. Outstanding performance was recorded by 6 Indian mutual funds in the last 3 years. Franklin Templeton, Merrill Lynch, Fidelity and HSBC registered elevated returns in 2006.

Further infusion by global asset managers in the Indian mutual fund market like JP Morgan, AXA Investment, Mirage Asset Group of Korea is likely by the end of 2007. Currently, 9 of the 30 asset management companies in India have global operations.

Prominent mutual funds in India like AIG Global, Birla Mutual Fund, DSP Merrill Lynch, HDFC , HSBC, Prudential ICICI, JM Financial, Lotus India, SBI and Franklin Templeton have ongoing schemes which can be considered for investment.

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