The Hindu : Business : Bright future for mutual funds industry: study

Online edition of India's National Newspaper
Saturday, May 06, 2006

Business

Business

Bright future for mutual funds industry: study

Staff Reporter

Consistency in performance attracting investors to mutual funds

KOCHI: The size of the mutual funds industry is expected to be worth Rs. 4 lakh crores by 2010 from its current level of over Rs. 2 lakh crores, according to a study conducted by the Associated Chambers of Commerce and Industry of India (Assocham).

The study says that investors in future would prefer mutual funds for their investment destination rather than choosing to park their funds in stock markets because of safer returns and lower degree of risk as compared to other markets.

The Assocham study has the compilation of observations made by over 210 investors across the country in which over 80 per cent have exuded confidence that the volumes of the Indian mutual funds industry will keep flourishing in future. In 1987, its size was Rs.1,000 crores, which went up to Rs. 4,100 crores in 1991 and subsequently touched a figure of Rs.72,000 crores in 1998. Since then this figure has kept ballooning, revealing the efficiency of growth in the mutual fund industry.

The study says that mutual funds would be one of the major instruments of wealth creation and wealth saving in the years to come, giving positive results. The consistency in the performance of mutual funds has been a major factor that has attracted many investors. The Indian mutual funds industry has been growing at a healthy pace of 16.68 per cent for the past eight years and the trend will move further.

The presence of intelligent investors has already made the investment market scenario fiercely competitive, with in increased number of high-yielding investment opportunities. The industry has also witnessed several mergers and acquisitions.

The study has revealed the futuristic nature of investors; they invest for future security and certainty (54 per cent). However, there were some investors who invest in order to meet their current requirements (38 per cent). In addition, it has been clearly indicated by the respondents that investments that are long-term are preferred more (54 per cent) over medium-term (23 per cent) and short-term investments (23 per cent).

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