The economic survey has called for more participation of retail investors in mutual funds, stating that there is scope for the industry to expand. The survey pointed out that only 7.7 per cent of the country’s total savings was allocated to mutual funds in 2007-08, thus leaving enough scope for the industry to grow.

The survey said retail participation in mutual funds, which stood at 15 per cent, is expected to increase in the years to come. Availability of products and investor education have improved and the industry has taken steps towards transparency and sound corporate governa-nce practices to generate investor confidence.

The report mentioned the turnaround witnessed in the performance of the mutual fund industry, wh-ich had remained subdued in the previous year. The report said net mutual fund investment in equity market turned positive in Ma-rch and it stood at Rs 2,320 crore during April-May.

Sandeep Sikka, chief executive officer of Reliance Mutual Fund, said mutual fund penetration in India is just around 3 per cent and there is a lot of scope to improve that figure. On increasing retail participation in mutual funds, Sikka said it was a slow process and mutual fund houses needed to increase their focus on investor education.

Anil Kumar, chief executive officer of Birla Sun Life Mutual Fund, said typical mutual fund allocation of investors as depicted in the survey only goes on to confirm that the mutual fund industry is underpenetrated. Kumar said there had definitely been increasing interest for mutual funds among investors, based on increasing awareness, positive sentiments in the equity market and availability of more products and convenient services.

Lakshmi Iyer, head (fixed income and product) of Kotak AMC, said mutual fund was a pass-through vehicle and one of the most efficient ways for participation in the market. “The extent of retail penetration has been showing a rising trend, which is very healthy for the growth of the industry. Financial literacy will go a long way in increasing retail participation."

The survey listed the initiatives taken by the Securities and Exchange Board of India (Sebi) to encourage investment in mutual funds and make them more effective and transparent.