Mutual funds have taken a fancy to government securities with investments by medium- and long-term debt funds growing by almost 100 per cent in the first four months (April-July) of the current fiscal compared with a tardy 13 per cent rise in investments in corporate paper.
The medium and long-term funds, which account for 60 per cent of the total debt fund corpus of Rs 32,219 crore, grew by 31 per cent to Rs 19,349 crore in July compared with Rs 14,726.18 crore in March.
In percentage terms, exposure to corporate paper came down to 57.10 per cent in July this year from 66.26 per in March 2001. Investments by the funds in gilts, however, doubled to Rs 6,241 crore in the four months.
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While the corpus of all debt funds -- short-, medium-, and long-term - grew by over 40 per cent to Rs 32,219 crore between April and July, the gilt exposure of medium and long-term funds grew to 32.26 per cent from 22.11 per cent during the period, according to Value Research, a New Delhi-based mutual fund research firm.
Birla Income Plus, DSP Merrill Lynch Bond, Pioneer ITI Income Builder, Pru ICICI Income Plan and Templeton India are some of the major funds in which corporate debt exposure came down in percentage terms in the last four months. Almost all the funds increased their exposure to gilts.
According to analysts, the dearth of good quality corporate paper and no big debt issues from corporates have resulted in funds leaning more towards government papers.
Moreover, with the softening of interest rates, the gilt markets too turned bullish in 2001. Secondary market transactions in the first four months of the fiscal touched almost Rs 3,82,000 crore compared with Rs 5,67,000 crore for the whole of 2000-01.
With no signs of a further interest rate cut, the rupee rush into long and medium term debt funds has started waning. The corpus of short-term gilt and debt funds have, however, bulged by over 100 per cent in the first four months of 2001-02.
Analysts said that with no indications of any rate cut, fund flow into medium and long-term schemes is now being diverted to short-term plans.
While the asset base of short-term gilt funds, which invest in paper with less than one year maturity, doubled from Rs 243 crore in March 2001 to Rs 494 crore in July, the short-term debt funds too registered a 116 per cent growth in their corpus from Rs 3,904 as on March-ended this year to Rs 8,446 crore in July.
Except for money market funds, the corpus of which dipped sharply by 92 per cent to Rs 5.69 crore as on July compared with Rs 70 crore in March this year, all the other pure debt funds posted a growth in their asset base.