Equity-wary investors go for FMPs

Investment schemes with safer returns are gaining attention of retail investors, as the ongoing correction and volatility in the markets coupled with hardening deposit rates have made investors and mutual funds opt for products such as Fixed Maturity Plans (FMPs) and Capital Protection-Oriented Schemes.

Mutual fund houses do not want to miss the bus at a time when investors are showing their preference for safer products. Since January, the MFs launched around 200 FMPs and mopped up around Rs 23,154 crore in just two months. The funds' total collections in the whole of last year were Rs 89,688.90 crore from 304 FMPs.

"FMPs are a hot item now. With the yearly return of around 10-11 per cent, they are definitely attractive compared to equities which are witnessing volatile movement in the past few months. Large amount of money is coming into FMPs, " Sandeep Bagla, head (fixed income) Principal PNB AMC, said.

He also said it was difficult to say whether the investment pouring into the FMPs have shifted from equities as many new players are also investing in debt schemes.

Besides, many MFs have also lined up Capital Protection-Oriented Schemes, which can ensure the return of capital on maturity and at the same time can invest in equities.

Currently, there are two such schemes "� from Franklin Templeton and UTI Mutual Fund "� and LIC, DBS Cholamandalam, Birla Sun Life and Deutsche have filed their draft prospectus with the Securities and Exchange Board of India (Sebi) to follow suit.

"The ongoing volatility in the equity markets has resulted in individuals looking for stable returns," Santosh Kamath, CIO (fixed income) Franklin Templeton, said. The fund house, after collecting around Rs 503 crore from its first capital protection fund, is betting big with a second scheme.

Reflecting the changing investor priorities, total investments in the growth schemes and ELSS during the January-February period fell by 8 per cent to Rs 16,582 crore from Rs 18,191 crore last year. Furthermore, the redemptions went up by 11 per cent this year.

The stock markets' wealth has eroded by around 10-15 per cent since their recent peak levels in January, while many top-performing equity mutual fund schemes lost up to 20-25 per cent of their net asset value (NAV) during the period.

Due to liquidity crunch in the economy, the money markets yields have touched newer peaks as demand for debt products soared.