The Hindu Business Line : Funds try to cash in on high-yielding FMP schemes

Kolkata March 8 Mutual funds are rolling out high-yielding FMPs (fixed maturity plans) for clients, including those who are currently reluctant to invest in equity funds and are not quite inclined to consider conventional debt products. The FMP space, already very active, is set to become livelier as a consequence.

A number of fund houses are known to be lining-up FMPs, targeting them particularly at big-ticket investors. The yields that are being indicated can be considered attractive under the circumstances, investment circles say.

The latest trend features even smaller customers, including those who have traditionally tried out short-term bank deposits. Many of them are keen to lock in their surpluses for limited periods of time.

Three-month FMPs are getting quite competitive, distributor sources suggest, adding that a lot of corporate and HNI money was currently moving towards such products now.

Mr Sameer Kamdar, Head- MFs, Mata Securities, referred to an aberration in the market as the reason behind the higher yields. "We see HNI and even retail money getting into FMPs. It is not that all of this was necessarily meant for bank deposits. The point is that FMPs are emerging as an even more important choice," he said.

Indicators

Among the relatively higher yields is Lotus India MF's 3-month Series III — 10.95 per cent — requiring a minimum investment of Rs 50,00,000.

There are quite a few plans with well over 10 per cent, according to a list provided by Mata.

At another level, a 13-month fixed-duration product being vended by Kotak Mahindra MF (the FMP in question closes in the second week of the current month) has an indicative yield of 10.25 per cent for wholesale investors who are willing to chip-in Rs 1 crore or more.

For the retail participant, this is about 9.8 per cent, the minimum allocation for them being Rs 5,000.

Fund houses generally suggest that clients, including SMEs and HNIs, want them to capitalise on the steep short-term rates that are currently prevailing in the system.

Locking in to high yields, feels Mr Vikaas Sachdeva, Head-Business Development of ING Vysya MF, is now a viable option for many. "While a range of choices is available, investors would like to chase the most competitive yields," he noted.

That the segment is swelling is borne out by the estimate that it now commands — nearly Rs 70,000 crore. Choices have multiplied — a trend that is evident from the latest data put out by the Association of Mutual Funds in India.

AMFI statistics pertaining to sales during the October-December quarter show that 122 close-end income schemes made up the category.

In comparison, there were 131 open-end income schemes. The figures for the corresponding period of the previous year were 50 and 138 respectively.