Mutual funds performance evaluation in India

In recent years, credit inter-mediation is shifting, with the traditional dominance of the banking sector yielding ground to non-bank intermediaries, including the asset management industry. In addition, mutual funds play an important role in equity, debt and money markets as efficient allocates of resources. The debt portfolio of mutual funds mainly comprises corporate debt instruments, which include floating rate bonds, non-convertible debentures and public sector undertaking bonds. In the money market segment, mutual funds are the major lenders in the collateralize borrowing and lending obligation segment, accounting for over 60 per cent of lending in this segment. As major domestic institutional investors, they operate in both primary and secondary segments of the capital market, providing a buffer against market volatility. AUM of MFs in India has registered a compound annual growth rate of 25 per cent over the last five years, outstripping the compound annual growth rate of only 11 per cent registered by aggregate bank deposits of scheduled commercial banks. With growing formalization and financialisation of the Indian economy, household savings have been shifting from physical assets to financial assets and within financial assets, from bank deposits to securities.