Indian mutual fund industry needs to widen its net: study

Monday, 25 June 2007, 07:00 Hrs
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New Delhi: The Indian mutual fund industry needs to widen its range of products with affordable and competitive schemes to tap the semi-urban and rural markets in order to attract more investors, says a leading industry body.

The industry has still not been able to penetrate among retail investors and it needs to share best practises from mature markets like US and Britain where mutual funds are the most preferred form of investment, said the Confederation of Indian Industry (CII).

According to it, mutual fund companies need to introduce products for the semi-urban and rural markets that are affordable and yet competitive against low-risk assured returns of government sponsored saving schemes such as post office saving deposits.

The industry is also plagued by scarce technological infrastructure and needs to collaborate with other sectors of the economy such as banking and telecommunications.

Mutual fund companies should also take advantage of the growing opportunity in the commodities market. Further, the mutual funds could also enable the small investors to participate in the real estate boom through real estate mutual funds, the CII study said.

It has also suggested that firms venture outside India as they are now permitted to invest up to $100,000 abroad.

"With a strong regulatory framework, clear guidelines and the talent to back it up, the Indian mutual fund industry is in a position to cater to the new breed of investors who are keen to diversify their risks," CII said.

The asset under management in the mutual fund industry has risen to a level of 4.14 trillion as on May 31,2007, recording a growth rate of nearly 50 percent as compared to the same month during year 2006.

The mutual fund industry also faces some major challenges in terms of manpower crunch, diminishing talent pool of fund managers, pressure of consolidation, innovation and product differentiation as increasing responsibility is being placed on the trustees to ensure that the funds are managed to the full benefit of the unit holders.
Source: IANS
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