As many as 93 FMPs have been launched by AMCs since January 2011 to cash in on the high yields from bank CDs as equity markets remain volatile
Mumbai: Mutual fund houses are flooding the market with FMPs to attract investors as the equity markets remain turbulent. As many as 93 FMPs have been launched by various fund houses since January 2011.
This is evident by the spurt in mutual funds investment in bank CDs. According to SEBI data, mutual funds have parked Rs 2.57 lakh crore, an overwhelming 53 per cent of the total debt portfolio in bank CDs as on January 2011, up 16% from December 2010.
Apart from CDs, MFs deployment in bank FDs has increased to Rs 28,807 crore in January 2011, up 55 per cent from Rs 18,520 crore in November 2010.
The consensus among the industry is that equities will not fetch great returns.
“The current yield that a person can get by locking money in FMPs for one year is very high. People are expecting equities to give 12 per cent to 15 per cent returns. FMPs are being sold to people saying that their tax implications after indexation would be equivalent to bank FDs. People are opting for a safer return from FMPs than opting for the equivalent return from markets by taking risk,” said a sales head from a foreign fund house.
AMC No of FMPs launched since January Birla Sun Life 9 IDFC 8 ICICI 8 HDFC 7 Fidelity 6 IDBI 6 BNP Paribas 5 DSP Black Rock 5 Reliance 5 Sundaram 5 SBI 5 Religare 5 Taurus 4 Tata 4 J P Morgan 3 UTI 2 Canara Rebecco 2 Taurus 2 Principal 1 L&T 1
Source: Accord
Due to the increasing liquidity crunch faced by banks, interest rates on three month bank CDs have gone up anywhere between 10 to 20 per cent. “Banks need short term money and liquidity has dried up,” adds the above quoted source.
