What equities can do, money can

Trust, once lost, cannot be restored. And a good case in point is the countrys equity and corporate bond market.
Two years since that market took a knock in the 2008 crisis, it still struggles to regain investors confidence, with investors choosing to park their funds in risk-free government treasury instruments.
The mutual fund industry also shares the same story with investors casting off risky investments. The improvement in the industrys asset size in the past few months is being attributed to the growth in appetite for funds that mainly invest in treasury instruments.
Based on data compiled by InvestCap Research, the mutual fund industrys asset size expanded by 21 percent to Rs240 billion in the first ten months of the current fiscal year, with growth primarily led by both money market and Islamic income funds.
The money market fund now accounts for nearly one-third of the total asset size (open-end mutual funds) - growing to around Rs72 billion at the end of April from Rs32 billion in June last year.
With investors shying away from corporate TFCs due to high price volatility, the asset size of income funds dropped by 17 percent to around Rs39 billion in the first ten month of FY11. Besides, restructuring of few major bonds during the past few years has also harmed investors faith in the corporate bond market.
At the same time, the asset size of equity funds swelled by 29 percent in the first ten months to Rs50 billion in April 2011. But that, according to market sources, came mostly on account of capital appreciation than injection of fresh funds.
Despite a double-digit growth, the total size of mutual fund industry is still well below the FY08 peak of around Rs335 billion. However, as the economy has started showing signs of betterment, improvement in investors risk appetite would cushion demand for mutual funds during the next year.
Since the total size of the mutual fund industry is just less than 5 percent of the total banking deposits, the market eyes enormous growth potential in this segment.
However, to help industry grow at its full potential, there needs to be an efficient secondary bond market. The future of the mutual fund industry also hinges on increasing market awareness and knowledge about the funds among masses.
Last but not the least, the reach of savvy fund managers also needs to be streamlined and the existing distribution network should expand, either by establishing small kiosks or by marketing their funds using distribution networks established by commercial banks and national saving centres.