Some Aspects of Indian Mutual Funds’ Performance During the Recent Financial Crisis

Money and Finance, April 2012

38 Pages Posted: 11 May 2012

Date Written: May 10, 2012

Abstract

This paper seeks to present a brief overview of the developments in the Indian mutual fund industry since the financial crisis of 2007. The broad developments show that while recovery in the industry post-crisis has been quite robust, a tendency towards risk aversion, akin to a global trend, has become visible, with the mutual fund industry’s asset base, resource mobilization and investment in capital markets increasingly leaning towards the most liquid asset classes. Lower policy rates and risk aversion are seen to have encouraged fund flows to debt-oriented funds and mutual funds’ investments in the debt market. Superior returns performance by equity mutual funds, however, are found to be accompanied by net withdrawals from these funds and net disinvestments by mutual funds in the equity market. An interesting finding of our study is the statistically significant change in the causal relationship between mutual funds’ and foreign institutional investors’ investments in the Indian equity market during the most recent bout of heightened economic and policy uncertainties.

Keywords: Indian mutual funds, AUM growth, mutual fund investments in debt and equity markets, financial crisis

JEL Classification: G23, G01

Suggested Citation

Bose, Suchismita, Some Aspects of Indian Mutual Funds’ Performance During the Recent Financial Crisis (May 10, 2012). Money and Finance, April 2012, Available at SSRN: https://ssrn.com/abstract=2055557

Suchismita Bose (Contact Author)

ICRA Ltd ( email )

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