First, fund management has shown more skillful and effective strategies to outperform the benchmark of indices in respect of equity oriented funds and better returns on the income funds. Gone are the days when the fund managements were putting their investments in the custody and waiting for the scrips to grow.

The fund management have now become very active and alive to the market trends and changing perceptions in the industrial sectors to take advantage in restructuring their portfolios. The fiscal 1998-99 has witnessed a tool of portfolio turnover in many of the active funds recording more than 100 per cent. This reflects the active investment monitoring by the fund management which ultimately has shown the growth in the equity funds much superior as compared to in the previousyears.

The restructuring of the fund management of the big brother UTI has also been reflected in the equity fund performance. It seems that past problems of the UTI are over. The strategy to get into more growth scrips with effective topdown analysis and appropriate timing of investments has shown that many of the open end equity mutual funds have grown in fiscal 1998-99 from 31 per cent to 120 per cent in their NAV performance.

Secondly, the effective implementation of the SEBI Regulations has brought the mutual funds on their toes to be more accountable as well as transparent to the investors. Adoption of broad parameters of transparency in respect of announcing the investment strategies, regularly disclosing the portfolio details, is helping the mutual fund industry to regain the eroded confidence of the investors and change in their perception.

Thirdly, the growing competition and the increasing awareness of coming out with innovative ideas by the mutual funds is pointing out a variety of productsthat will be made available to the investors. Many of the mutual funds, including Tata Mutual Fund, has given a family of funds to the investors from the cradle (Childrens Fund) to Retirement (Pension Fund).

This augurs well for the investors to select the needed investment products of the mutual fund industry based on his risk-bearing capacity as well as his needs of adding value to his investments with choice of number of funds.

Fourth, the effective marketing and distribution strategies which were hitherto deployed by only UTI have now been adopted by the rest of the top mutual funds. The distribution network is being widened; the effective marketing tools are adopted to create awareness of the benefits of the mutual fund products.

There is a move to create a specialised financial advisers cadre who will make the intricacies and advantages of the mutual fund product effectively understood by the investors through the newly developed marketing and distribution channels. It is heartening to note thatthere are a number of specialised intermediaries who are undertaking not only distribution activity but also making the effective marketing activity to specialise in the mutual fund products. This new trend will definitely bring more and more investors to invest in mutual funds.

Fifth, the need for a prompt, courteous and efficient after-sales service to the investor has been recognised due to increasing competitiveness in the industry. The investor today gets efficient and prompt service through the adoption of new technologies in servicing him by many of the mutual funds.

The competition is making the after-sales service more and more as a vital thrust for attracting the investors to the mutual fund industry. This is particularly so in case of new mutual funds who have entered the market since 1994 onwards. The positive effect of this is that all mutual funds will have to give lot of attention toards the two areas -- increasing transparency and improving after-sales service to the investor.

Thus, weobserve that at the entry door of the new millenium, the mutual funds are positioning themselves so well to turn a new leaf in their growth. Apart from mutual funds themselves taking into account, the above five factors, Sebi and government have also contributed to give the needed thrust for making the mutual fund products more safe and tax-efficient.

The recent provisions of the Finance Act making the equity oriented open ended funds (50 per cent and above equity portfolio) to distribute tax-free dividends to the unitholders for the next three years and other funds to distribute tax-free in the hands of the investors subject to paying 11 per cent tax (including surcharge tax) has not only made the mutual fund products more attractive but also makes it simpler for the government to collect the tax through the mutual fund vehicle instead of directly from millions of investors. The benefits under long term capital gains tax under Sec 54EA and 54EB have made mutual fund products more acceptable and attractivefor the investors.

One area which AMFI has requested government to consider is to give sufficient tax breaks in the segment of retirement and pension funds adopting the model of USA -- Sec 401-K Plan. Once this is effectively given to the mutual fund industry, the growth in the industry will be still more faster. The recent announcement of the government to allow the mutual funds to launch Gilt Funds and cater to the private provident funds for investment in government securities through them is the most welcome step in this direction.

The most important change in the scenario which is now shaping very well is pertaining to the expected substantial growth in the equity funds in the coming years instead of income funds. The guaranteed return schemes which are not part of the mutual fund industry abroad, but have contributed substantial inflow of the funds in such schemes is getting re-examined by mutual funds like UTI and other public sector mutual funds.

There is a trend which clearly indicates thatthe five-year dividend guaranteed schemes are not going to be viable in view of the volatile interest rate structure. The industry has already shifted from five-year guarantee to one-year guarantee. The most heartening change in the perception is towards the equity oriented funds and balanced funds.

UTI has already announced a tax-free dividend in the case of its open end fund -- Masterplus at 12 per cent. Recently, Tata Mutual Fund also announced tax-free dividends in the hands of the investors in the three equity oriented funds -- Tata Equity Growth Balanced Fund at 12.50 per cent; Tata Twin Option Fund (Pure Equity) at 16 per cent and Tata Tax Saving Fund at 20 per cent.

The industry has witnessed launching of many growth sector funds in the recent past and during this month, three mutual funds -- Tata Life Sciences & Technology Fund, SBI Mutual Fund sector fund and UTI growth sector funds. This new trend is attracting the investors more towards such funds, while in the past, the majority of fundswere attracted by the income funds of UTI as well as other mutual funds.

In the new millenium, the perception of the investors towards equity funds and balanced funds is changing fast as they have seen that these funds will provide them not only higher returns in the long run but will also provide a hedge against inflation subject to market risk.

India as an emerging market has good potential for growth. FIIs have brought in more than Rs 1,500 crore during the last one month and the stock markets have already crossed the BSE Sensex index of 4000. The temporary setbacks in the markets due to recent turmoil at the Indian borders in Kashmir may be affecting the sentiment of the market. However, the fundamentals of the market are quite strong and industrial growth is expected to improve which is also reflected in the increase in the earnings of the large number of corporates for the current financial year.

March 1999 figures of the net assets managed by the private sector funds have shown a growth of about64 per cent from Rs 4,100 crore to roughly Rs 6,700 crore. Even the public sector funds have shown a growth of about 8 per cent in their net assets from March 1998 to March 1999 recording net assets increase from Rs 7,400 crore to about Rs 8,000 crore. The collections of UTI have also shown the increase in trend from the current year. The total assets of the industry which are today at around Rs 68,000 crore may reach a figure of Rs 90,000 crore by the end of year 2000.The author is managing director of Tata AMC