"It is a potential barrier for new entrants, as their memory is linked to IPO days. Although this apprehension has no substance, this barrier prevails since an IPO at par in 1994-96 was considered a luxury. However, it is only a matter of time before these doubts wither away,'' says the head of a private agency that markets mutual funds. ``It is anothet chapter for the Indian mutual fund industry which is on a learning curve,'' he adds.

For instance, the NAV of Birla Advantage has galloped from Rs 22.69on April 29, 1999 to Rs 31.65 on August 31, a gain of 40 per cent. Alliance '95, the balanced fund from Alliance Capital, has zoomed an impressive 43 per cent to Rs 37.65 in the same period. While Bluechip from Kothari Pioneer is currently selling at Rs 34, the infotech funds is hovering around Rs 29.

``There is a general perception among investors that they are comfortable investing at lower NAVs rather than investing at higher NAVs. However, we have explained at length to investors that two NAVs (one high and the other low) will appreciate at the same pace if two funds have ditto portfolio. This has gone down well with investors and we have sold a lot of Birla Advantage units in the current rally,'' says a representative from Birla Mutual Fund. Birla Mutual Fund has also been cirulating a one page write-up in its monthly updates that a lower NAV does not mean a higher potential for growth.

"Investors must understand that NAV is a function of the stocks that make up the portfolio and it is not a share ora scrip per se. If the stocks in the portfolio are rising, the NAV will rise and by same level, notwithstanding whether it is at Rs 10 or Rs 100,'' points out an industry observer.

Alliance Capital has also taken specific examples to convince investors that starting levels of NAVs are immaterial. ``The NAV at the time of purchase is irrelevant. What is relevant is where the mutual fund is investing and whether the investments are likely to increase in value or not,'' it says.

On the other hand, there are informed investors for whom high NAVs are not a deterrent. ``Investors today are far more informed and educated and view high NAVs as a proof of the fund's good performance. Kotahri Pionner has not experienced any problem with regards to sale of unit of funds which have high NAVs. In July, we got 4,700 applications for Bluechip when NAV was over Rs 30,'' says Prem Khatri at Kothari Pioneer. Adds a representative of a foreign bank that sells mutual funds, ``We hardly face any problems since we are aninformed intermediary that deals with a very informed set of investors.''

However, a section of the fund industry feels that the aggressive sales pitch adopted by most of the funds is purely on the basis of past returns, which is not good for the long-term. ``It is another worrisome factor since funds are not talking of the risk asscoiated with these returns. They purely harp on past returns,'' rues a representative of a private fund.