Investments are pouring in for the fixed maturity plans (FMPs) as investors rush to park their funds for a period of slightly more than a year (13 months) to gain from the "double-indexation" benefit offered by these debt schemes. |
As per industry estimates, the MFs have collected around Rs 15,000 crore during March, the last month of the financial year. |
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Mutual fund houses have witnessed nearly 10 times increase in retail participation in the FMPs from the last couple years as they prefer these stable return giving debt schemes over equity funds in view of frequent volatility in the stock market. |
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"The trend to invest in FMPs during the end of the fiscal continues. But this year lot of money, which were earlier going to the bank deposits and small savings, has shifted to these schemes, which are also giving good returns. Especially, during the second and third week of the month, most of the investors have put their money in FMPs and this year the retail participation has gone up to a greater extent," Nilesh Shah, chief investment officer of Prudential ICICI, said. |
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Investors, who fall in the highest income tax bracket, park their funds in the FMPs during the last few days of the financial year for a period of more than a year and get the "double-indexation" benefit for the next two financial years. . |
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This means, if an investor invests in a typical 13-month FMP before the end of March 2007, the amount he would get on maturity in April 2008, would attract indexation rate for two different fiscals, even though the period the money stay invested is for a much shorter term. |
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Put simply, the investor would get the benefits of 2006-07 index , as he is investing before the end of 2006 as well as the index of 2008-09, as the scheme matures in 2008. |
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"Last few years, the investors have been putting money in FMPs, aimed at getting benefit of the double indexation. This year, as the returns given by the debt funds have grown by a quiet an extent, the FMPs have become more attractive than the bank fixed deposits. This is the main contributor to the retail growth," Dheeraj Singh, fund manager with Sundaram BNP Paribas MF, said. |
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"In view of the good inflows from FMPs, this year the fund houses marketed these schemes very well, as compared to last few years. Besides, large number of FMPs were introduced by various fund houses. Retail as well as High Networth Individual participation has gone up significantly," Sameer Kamdar of Mata Securities said. |
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