Rajiv Bajaj, Vice-chairman and managing director, Bajaj Capital, talks to Dipak Mondal on why retail investors shy away from investing in mutual funds.
Retail participation in mutual funds, especially in the equity-oriented schemes, has been declining. Are you witnessing a similar trend in your sales?
Being one of the larger players in the industry, we are not immune to industry trends. There was indeed a lack of retail investor interest in equity mutual funds in the first half of 2010, but the situation has improved significantly in the second half, particularly in the July-September 2010 quarter. Barring any developments that lead to a shake-up in investor sentiment, we expect this trend to continue in 2011 as investors finally wake up to the fact that they need their investments to at least beat inflation and that debt alone is not going to do that.
What are the primary reasons for retail investors staying away from mutual funds?
Mutual funds largely remain a push product rather than a pull product. It's a rare instance when an investor comes and asks us to invest in mutual funds. This can be attributed to lack of awareness and financial illiteracy. Since abolition of entry loads on 1 August 2009, all entities, including AMCs and advisers, have lesser funds for 'investor outreach'. Hence, retail participation has suffered. Financial planning is no doubt the best solution. Though mutual funds are yet to penetrate the retail investor category to the desired level, we remain bullish about the future as there is a greater acceptance for financial planning among investors.
|"Investors prefer taxsaving plans to provident funds as they yield higher returns."|