Indian households started locating more of their savings to the capital markets in 1980s, with the investment flowing into equity and debt instruments, besides the conventional mode of bank deposits. Until 1992, primarily market investors were assured good returns as the price of new equity issues was controlled. After introduction of free pricing of shares, and with greater volatility in the stock markets, many investors who bought over priced shares lost money and withdrew from the market altogether. Mutual funds serve as a link between the saving public and the capital markets in that they mobilize savings from investors and bring them to borrowers in the capital markets.
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