• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Brand Quest
• The New Manager
• BL Club
• Smartbuy

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth
• Events 2007

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

Sharvari Patwa

Mumbai, Nov. 26 Uncertainty over future cash flows seems to be pushing investors to park their money in short duration fixed maturity plans (FMPs), rather than in schemes of longer duration.

Of the 366 FMP schemes launched since September, 140 carry a maturity of three months, according to Value Research data. Three-month FMPs constitute close to 40 per cent of the new schemes.

While there has been a more than 50-per cent drop in the number of new schemes in November compared with October, those of three-month tenure are drawing high investor interest.

Investors are unwilling to lock in capital for a long period in the current situation as they are not confident of their future cash flows in the long term, said Mr Parijat Agrawal, Head-Fixed Income, SBI Mutual Fund.

Historically too, in times of uncertainty, short-term FMPs are favoured by investors, said Mr Ramkumar K, Head-Fixed Income, Sundaram BNP Paribas Mutual.

The liquidity conditions in September and October had been unusually tight, with even banks going slow on lending, said fund managers.

Having to cope with job and salary cuts, many investors are apprehensive they may need liquidity at short notice.

“Six months is the maximum that the investment call stretches to,” said a fund manager.

Another deterrent for long-term FMPs could be hefty exit loads , said Mr Badrish Kulhalli, Senior Fund Manager-Debt, Principal PNB Asset Management.

Some fund houses have raised their exit loads in order to prevent early redemptions; some time ago there was immense redemption pressure from corporates, said fund managers.

FMPs have come under the scanner as there is a question about their asset-liability mismatch.

“The overall quantum of mobilisation in these FMPs has declined, and to a large extent the decline has been from the corporate side,” said Mr Amandeep Chopra, Head of Fixed Income, UTI Mutual Fund.

More Stories on : Mutual Funds | Investments

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Copyright © 2008, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line