The Hindu Business Line : Fixed maturity plans on investors’ radar again

Kolkata, Aug. 28 For fixed maturity plans, the wheels of fortune may yet be turning again. Witness the recent increase in investors’ takings from this category of products, a trend accompanied by a step-up in the number of FMP issuances.

The change, which is expected to result in higher inflows for these products, has probably come at the cost of short-term plans (STPs), investment circles aware of developments feel. STPs, they add while referring to recent mobilisation figures, have been till recently a more preferred option for an influential section of the investing community.

The greater number of FMP offerings, an indicator of the latest state of affairs, is now coupled with better rates. Taken together, the two factors further prop up the changing scenario, it is pointed out.

Rise in yield helps

The rise in short term yields has worked well for FMPs as these have been presenting relatively attractive yields in the current month as compared to those in the previous month, observed Mr Sameer Kamdar, Country Head – MFs, Mata Securities.

On the other hand, STPs have been under-performing, and in a few cases have even delivered negative returns over a one-month period due to mark to market component in their portfolio amid the 150 basis points (bps) rise in yields in the 1-to-1.5 years maturity bucket, he explained.

“The short term yields having spiked in the month of August following a slew of policy measures including the hike in CRR to 7 per cent, the removal of cap in reverse repo volumes, the hike in limit of MSS issuances to Rs 1,50,000 crores and restriction of ECBs that only up to $20 million could be brought into the country”, Mr Kamdar said.

STPs had indeed attracted considerable allocations in May-June as the short-term yield curve became steeper and liquidity in the system picked up. This again was a modification – viewed against the fact that the universe of STPs had shrunk markedly in the first few months of the current calendar year.

As the latest half-yearly investment review by ICICI Bank points out, their corpus declined drastically as advance tax outflows and year-end pressures drained liquidity from the system. “Diversion of funds to FMPs could also be cited as one of the reasons towards reduction in corpus of short term plans,” notes the bank in its review.

More FMPs in the offing

Fund houses continue to come up with more fixed-term offerings, a trend evident from the number of offer documents that have been filed lately with SEBI.

Among those that have done this are Franklin Templeton, Tata and ING. The products in question include Templeton Fixed Horizon Fund – Series V, Tata Fixed Horizon Fund – Series 15 and ING Fixed Maturity Fund – Series XXXV.

Recent innovations include the just-concluded 90-day product under SBI Debt Fund Series, which will charge a 1 per cent load if investors pull out earlier. It came out with a 60-day fund some weeks ago.

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