The Economic Survey, released by the Centre on Thursday, has warned investors to tread caustiously and take informed decisions while investing in the stock market. It has said that if people do away with the ?herd mentality? and not panic, they can reap the benefits.
The survey stated that investor awareness is important for market stability as investment in equities could be based on incomplete analysis and guided by short-term speculative gains.
However, the survey puts the responsibility of ensuring healthy and orderly conditions of the market on the policymakers, regulators and participants.
It said, ?While policy initiatives are required to be well calibrated to transmit the right policy signals unambiguously, the regulators need to remain proactive and vigilant to obviate the occurrence of any irregularities in the conduct of business in the market.?
On the issue of growing importance of insurance and pension funds, the survey said impetus would be provided to broaden the horizon of the government securities market. The provisions in the government Securities Act, 2006, is expected to expand the government securities market, especially its retail segment.
A major challenge is in the corporate debt market. A high-level committee on corporate bonds and securitisation, set up by the government, had deliberated on various issues relating to the corporate debt market like debt issuance, pricing, trading and settlement, the survey said.
With regard to the mutual fund (MF) industry, the survey said that the net inflow of savings into mutual funds increased by over 30% in 2007 to Rs 1,38,270 crore. The assets under management (AUM) went up 1.7 times from Rs 3.23 lakh crore during 2006 to Rs 5.50 lakh crore in 2007. The sharp increase in funds flowing into mutual funds during 2007 was partly due to buoyant markets and also owing to the efforts of mutual fund houses, which launched innovative schemes. The income and debt-oriented schemes fared relatively better during the year compared to other segments.
The recent pick-up in the amount of resources mobilised by fund houses and the assets they manage are an indication of the preference for mutual funds. ?This would find its way to the capital market,? the survey said.