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Indian mutual funds market to witness strong growth

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The mutual fund market in India is experiencing rapid growth on the back of infrastructural developments, increase in personal financial assets, and rise in foreign participation, according to the latest research by RNCOS.

A new RNCOS report, "Indian Mutual Fund Market Analysis", reveals that with growing risk appetite, rising income, and increasing awareness, mutual funds in India are becoming a preferred investment option compared to other investment vehicles, such as Fixed Deposits (FDs) and postal savings that are considered safe, but provide comparatively low returns. Moreover, it is expected that the Indian Mutual fund asset under management will reach INR 13,250 Billion by 2014, growing at a CAGR of around 15% during 2010-2014.

Ongoing research found that despite huge potential, the limited participation by the Indian rural sector greatly restrains the mutual fund industry’s growth. Mutual funds are still inaccessible to a major part of the rural population due to poor distribution, lack of awareness among investors, and limited banking facilities. Moreover, asset management companies show reluctance towards investing in infrastructure building of smaller towns due to the lower margins from rural businesses.

The report outlines mutual fund market by segmenting it into various subsections, i.e. by investment objectives, type of investors, type of asset management companies, and geographical location. It also elaborates the fact that, banks and asset management companies should share the responsibility of penetrating into the rural economy. Besides, they need to create awareness among the masses about their products and their benefits in the coming years. Thus, opportunities in the rural sector will add to the growth of the Indian mutual fund industry during the forecast period.

Forecasts and estimations in the report are not based on a complex economic model, but are intended as a rough guide to the direction, in which, the industry is likely to move in future.

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