This calendar year is likely to be a good period for debt schemes as in the midst of high interest rates, these funds offer better returns compared to equity funds. The high inflationary pressure leading to tightening of the monetary policy has influenced mutual fund (MF) houses to file offer documents in debt segments and reduce its exposure drastically in the equity segment.
The interest rate scenario due to the high inflation rate presently at 11.05%, a 13-year high, has impacted the equity market.
More than a dozen MFs including Reliance, ICICI Prudential, Sundaram BNP Paribas, and HDFC have filed their offer documents with Sebi for the fixed maturity plans (FMPs), debt and liquid fund schemes. SBI has also filed a offer document for debt funds.
Another interesting apsect why debt is becoming the more preferred route for investment is that equity markets have begun to give negative returns amidst high volatility. The benchmark indices Sensex and S&P CNX Nifty have lost almost 30% from its peak in January 2008. The Sensex and Nifty have declined by 1,315 points and 391 points respectively.
Commenting on this trend, Waqar Naqvi, CEO of Taurus Mutual Fund, said, “This year, we have seen equity markets turning very volatile and more and more fund houses are selecting FMPs for their investors. In the last month, we have seen numerous fund houses filing offer documents for FMPs, as they assure a good return in the current market situation.”
The tilt of MFs towards the debt segment can be gauged with Sebi figures according to which the total investment in equity schemes stood at Rs 5,836.5 crore while investment in debt was at Rs 44,607.1 crore from January 1, 2008 .
Interestingly, the RBI has hiked repo rate and CRR by 50 basis points on Tuesday and the banking regulator may resort to further rate hike to arrest the spiraling inflation, MFs feel. In this backdrop, the MF industry thinks that the year 2008 will be the ‘year of debt funds.’
A market analyst said that the BSE Sensex dipped 29.95% or 6,080 points between January till date resulting in erosion of value of equity funds. Contrary to this, K. Ramkumar, head, fixed income, Sundaram BNP Paribas Mutual, said that the FMPs have posted return in the range of 8.5% to 9%.
The interest rate scenario due to the high inflation rate presently at 11.05%, a 13-year high, has impacted the equity market.
More than a dozen MFs including Reliance, ICICI Prudential, Sundaram BNP Paribas, and HDFC have filed their offer documents with Sebi for the fixed maturity plans (FMPs), debt and liquid fund schemes. SBI has also filed a offer document for debt funds.
Another interesting apsect why debt is becoming the more preferred route for investment is that equity markets have begun to give negative returns amidst high volatility. The benchmark indices Sensex and S&P CNX Nifty have lost almost 30% from its peak in January 2008. The Sensex and Nifty have declined by 1,315 points and 391 points respectively.
Commenting on this trend, Waqar Naqvi, CEO of Taurus Mutual Fund, said, “This year, we have seen equity markets turning very volatile and more and more fund houses are selecting FMPs for their investors. In the last month, we have seen numerous fund houses filing offer documents for FMPs, as they assure a good return in the current market situation.”
The tilt of MFs towards the debt segment can be gauged with Sebi figures according to which the total investment in equity schemes stood at Rs 5,836.5 crore while investment in debt was at Rs 44,607.1 crore from January 1, 2008 .
Interestingly, the RBI has hiked repo rate and CRR by 50 basis points on Tuesday and the banking regulator may resort to further rate hike to arrest the spiraling inflation, MFs feel. In this backdrop, the MF industry thinks that the year 2008 will be the ‘year of debt funds.’
A market analyst said that the BSE Sensex dipped 29.95% or 6,080 points between January till date resulting in erosion of value of equity funds. Contrary to this, K. Ramkumar, head, fixed income, Sundaram BNP Paribas Mutual, said that the FMPs have posted return in the range of 8.5% to 9%.
