Till about 5 – 10 years back, fixed return instruments like NSCs, RBI Bonds, Postal Saving Schemes, etc were given good returns and Indian investors were predominantly investing in these instruments. However, over the last few years the return from these instruments have hovered around 8 per cent which net of tax translates to a return of around 5 per cen & with inflation around 5 per cent on an average, deployment of funds in these traditional instruments are not yielding adequate returns. Hence there is a need for investing in the capital market for appreciation of hard earned savings. Retail investors are slowly realising this fact and trying to invest in the equity market either directly or through Mutual Fund Units or ULIPs of Insurance companies.

You may also note that a large part of the equity investments in other countries (like USA, South Korea, etc.) come from large pension and retirement funds. Unfortunately, till recently, in India, these funds were prohibited from investing in equities.