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To judge the Indian mutual fund industry by assets under management, the most recent fiscal year was not a good one. Although the Indian economy grew by 8.5 percent in the 12 months ended March 31 and the benchmark Bombay Stock Exchange’s sensitive index, or Sensex, rose 11 percent in that period, the fund industry’s average assets declined by 6.3 percent.

You wouldn’t know business was down by talking to industry executives, though. Retail investors, who had drifted away in recent years, seem to be taking mutual funds a little more seriously as an investment option. In addition, fund managers are coming to grips with a series of regulatory changes in recent years designed to get the industry to focus more on investment performance than on razzle-­dazzle marketing. These developments have injected a healthy dose of optimism into an industry that a year ago was awash in gloom.

Reliance Capital Asset ­Management Co. illustrates these recent trends. The firm retains its position atop the India 20, Institutional Investor’s annual ranking of the largest Indian fund managers, even though its assets declined by 7.8 percent in the 12 months ended March 31, to $22.6 billion. The decline is, in part, intentional. Reliance has de­emphasized its fixed-­income funds recently because the business serves mainly as a channel for corporate liquidity and has low margins. Fixed-­income funds represent about 60 percent of the industry’s assets, and fully half of the investment in those funds comes from just 70 Indian companies, according to industry executives. By contrast, Reliance has placed a higher priority on selling equity mutual funds to retail clients, says Chief Executive Sundeep Sikka. The firm conducts as many as 400 training programs a month for small investors and has introduced telephone- and mobile-based fund transactions. “We wanted to achieve a healthier mix between corporate and retail investors,” he says.

Reliance is far from alone. The industry, at large, is stepping up its efforts to draw in retail investors. The Association of Mutual Funds in India, or AMFI, the trade body of money managers, is spreading the gospel of mutual funds. Working in cooperation with fund management firms, AMFI conducted 5,000 investor awareness programs in the latest fiscal year that attracted 300,000 potential investors in 280 cities and towns across India. In ­September, AMFI launched a television advertising campaign to promote regular investments in mutual funds. Individual firms are chipping in with efforts of their own. “We have created proprietary software and short films, and are partnering with better quality distributors to educate investors,” says Naval Bir Kumar, president and CEO of IDFC Asset Management Co. The firm rises one place, to No. 11, in the India 20, thanks to an 8.2 percent rise in assets in the latest year, to $4.7 billion.