Expressing concern over the increasing dependence of the mutual fund industry on company and

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institutional money, the economic survey has said that the lack of retail participation could lead to volatility.

“Retail investor participation remains limited in the corporate debt market and mutual funds. The interdependence between corporate and mutual funds has recently raised concerns relating to volatility in financial markets,” the survey said,

Institutional players including firms and banks make for over 80 per cent of investments in debt and fixed-income funds that account for close to 75 per cent of the assets under management of mutual fund industry. Fund houses say a lot needs to be done to enhance investor awareness to increase participation in the mutual funds, especially in debt and fixed-income funds.

A Balasubramanian, CEO, Birla Sun Life Mutual Fund, said there is a need for educating investors on the benefits of long-term investment in mutual funds. “People are not aware of the fact that fixed-income funds give better returns than bank fixed deposits and with rising inflation, their relevance increases all the more. By proper switching of money from equity to debt funds, mutual funds could be used as a tool for long-term wealth creation.”

Jaideep Bhattacharya, chief marketing officer, UTI Mutual Fund, told Financial Chronicle that of all the savings instruments, mutual funds come seventh in terms of preference among investors. “That shows the kind of awareness about mutual funds in India. As an industry, the mutual funds have to do a lot in terms of investor education to increase the investor base,” he said.

He said that Indian investors prefer low-risk, constant-return instruments and although fixed mutual funds have low risk, they don’t have a defined return and that is a big deterrent for these funds in attracting a large investor base. The survey also underlines the need for increasing investor awareness.