With the Indian Mutual Fund industry standing on the verge of a massive growth, it is time to do a SWOT analysis of the same.

Financial reforms in India had a great impact on not only the financial system but also the economy as a whole. The booming financial market has a lot to do with the growing Indian economy. It is the financial markets that provide the necessary resources for the economic activities of any country. The Indian economy is projected to grow over 9% during the 11th Plan period. To support such a growth, one needs to have a sound financial market. For over a decade now, the Mutual Fund (MF) industry has been witnessing a double-digit growth. This significant growth is an indicator of the efficient financial market. In this context, it would be very interesting to make a SWOT analysis of the MF industry in India and watch out for the future trends.

Indian economy has been witnessing a growth rate of over 8% for the last three consecutive years. Both the savings and investment rates in the country are increasing significantly. Presently, India's savings rate is 32% of the total GDP and investment is 34%. Both these rates are expected to rise further in the years to come. The Liberalization, Privatization and Globalization (LPG) initiated during early 1990s are providing results today. India is now ranked among the fastest-growing economies of the world. Foreign investors are finding the Indian market to be of greater potential. India's Forex reserves are standing around $175 bn.

The MF industry in India came into being in 1963 with the setting up of the Unit Trust of India (UTI). In 1987, public sector banks and insurance companies opened their own mutual funds, thus initiating the second phase in the growth of the mutual fund industry. By the end of 1988, the industry's total Assets Under Management (AUM) reached Rs. 67 bn. The industry crossed a major milestone in 1993 when the first private sector player, the erstwhile Kothari Pioneer Mutual Fund (now merged with Franklin Templeton), was set up. After this, several international players also entered the field. The MF industry witnessed a spate of mergers and acquisitions, the most recent one being the acquisition of Alliance Mutual by Birla Sun Life, GIC Mutual by Canbank Mutual and Sun F&C by Principal Mutual. Asset Management Companies (AMCs) are increasingly getting their act more organized.

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