Overheated markets are a concern not just for equity investors, but for those investing in debt too.
Just as fund managers are increasing their allocations to mid- and small-cap stocks whose valuations are frothy, debt fund managers are stacking up lower-rated debt, which carry higher risk.
According to data from ACEMF, two-thirds of the 771 Fixed Maturity Plans (FMPs) had allocated their assets into relatively risky debt instruments, rated AA and below towards the end of June.
In value terms, 27 per cent of the ₹90,000-odd crore assets under management of FMPs, valued around ₹24,000 crore, were invested in ‘AA’ and below rated debt instruments.
This is way above the 10 per cent exposure to lower rated bonds in March 2014.
