Master of Business Administration Executive
Faculty / School
Faculty of Business Administration (FBA)
Year of Award
MBA Executive Research Project
Through this study, we are trying to analyze the Impact of Stock market fluctuation on Pakistan’s Mutual Fund Industry and establish the level of relationship between the Stock Market Fluctuation and rise and fall of assets under management of Mutual Fund Industry. Study is trying to establish whether assets under management of mutual finds increase and decrease along with rise and fall in stock mutual funds.
The Primary research for the study has been conducted through a detailed survey questionnaire; the questionnaire was aimed at meeting the needs of investors as well as wider market participants such as fund managers, stock brokers, MUFAP representatives as well as bankers and Focus Group Discussion (FGD) was also arranged to more root level feedback from the primary respondents. Whereas the secondary research was conducted though gathering the trading data as well as economic data accumulated from various resources such Pakistan Stock Market website, MUFAP website, SECP, SBP and research houses. However, being the multidimensional in nature, due to stock market adverse fluctuations and writer’s being from Government organization, it remained extremely difficult to access primary sample data and conduct focus group interviews as majority participants were reluctant to share their genuine views about subject research topic. Another strong difficulty faced during the collection of primary sample was due to current market index being down by around 25% from its recent past maximum range, so respondents were morally down by the prevailing situation and investors’ pressure for sell.
Study has established that usually assets under management of equity funds are effected by rise and fall in stock mutual funds, whereas other funds such as fixed income mutual funds are unaffected by any kind of volatility in Stock Market. Whenever the market rises, the equity mutual funds witness the increase in assets under management. Study also establishes that performance of assets under management of equity markets are also correlated to earning per share of companies, inflation, GDP growth rates, interest rate, money supply and level of per capita income of the country. Whenever the earning per share of companies, low discount rate, GDP growth rates, money supply und inflation is on rising side, it tends to have positive effect on assets under management of equity mutual funds as these same also result in rise in stock market and it effects positively to all other assets. Whereas rise in taxes, interest rates and uncertain political and economic environment will have negative effect on the performance of Stock Market and assets under management of mutual funds.
The Report also includes the focus group discussion, which highlights current economic and stock market crisis. The focus group discussion concludes that KSE-100 is trading at P/E of 7.9 which is cheapest in whole Asia. The cheap stock market P/E is beneficiary for mutual funds, as they can attract fresh investment, based on low P/E and expected GDP growth rate of 5.3%. The focus group concludes that cheap P/E and high GDP growth rate positively effect stock market as well as mutual fund industry. But it again emphasizes the need to increase the investment awareness.
The report writer at the end of the report has identified few recommendation upon implementation of which Assets under Management of Mutual Fund has huge potential to grow. In my humble opinion, the Regulator i.e. SECP needs to improve and enhance Regulatory Framework which can further encourage the investment in mutual fund industry. The Regulator along with Asset management companies should conduct Investor Awareness seminars to improve the knowhow of investors. The Regulators i.e. SBP and SECP should give investment incentive to investors to increase investment into equity mutual funds. This study like any other reports do have few limitations; first and foremost is the size of sample through which the survey was conducted, if survey reach is enhanced to wider group, report may be able to establish further strong links. Also, Pakistan Mutual Fund industry is in evolving stage, it may need many more years and much more efforts to enhance the awareness scope about investment in mutual funds and its advantages. I would recommend student, who are willing to conduct further study on topic to approach the Regulators as well, so that their views can also be incorporated in the reports.
Narejo, Z. (2017). Impact of stock market fluctuation on Pakistan's Mutual Fund Industry (Unpublished graduate research project). Institute of Business Administration, Pakistan. Retrieved from https://ir.iba.edu.pk/research-projects-emba/113
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