Fixed Maturity Plans turn money grossers for MFs
The fixed maturity plan (FMP) juggernaut rolls. With interest rates remaining at a high level of TFP, which invest primarily in bank certificate of deposit (CDs) are now almost complete mobilization of the mutual fund (MF) trade in new launches.
FMPs awesome move of 338 crore Rs 68 or 97.8% of the money collected from the new fund will begin in January-May 2011 data show. The mobilization of funds from FMPs in 2011 (until May) is almost four times more than the same period last year and 94% of total collections in 2010.
TFP in the short term have a good option, because investors will be able to block their money at high interest rates. “The market environment is still favorable to the PAF,” Dhruva Raj Chatterji said, senior analyst at Morningstar India, an investment research firm.
“PAF would support (optional) for investors, as long as interest rates remain high,” he said. The rate at one year bank CD, which banks borrow in the market is still hovering around 10%. “Interest rates are essentially fixed. Bank CD rates have not fallen much,” said an official of the industry.
PGF, debt instruments CM investing in fixed-term and commercial paper and CDs, in turn an attractive high interest rate and inflationary environment. Were encouraged when inflation reached double digits in mid-2008 ended the year with a collection of Rs 1,16,320 crore discs.
“Prices increased during the second half of April and May,” said Lakshmi Iyer, head, interest rates and products, Kotak Mahindra MF. As a result, FMPs continued to remain attractive even in a lean season for those products, he said.
While the FAP must not specify return codes, plans that have a period of just over one year deal with the tax returns of nearly 9% in one year CD rates held firm, sources of industry. Therefore, TFP would provide better after-tax fixed income categories of class, including bank deposits, fixed deposit over a period of one year, they said.
Although the pace of releases and collections made by FAP is low in the past two months, they remain high relative to average levels. PGF mobilized R 10 481 million rupees in April-May 1205 compared to a mere Rs crore collected in the same period last year.
PGF usually see more interest in early years, especially in March that investors would be able to use the double indexation of benefits when they invest in this month. This means that investors buying an FMP with a maturity of just over a year in March would be able to use the inflation index for the two fiscal years, significantly reducing the tax outgo. In addition, forest management plans Rs 27,912 crore collected in March, the highest ever monthly mobilization.
Source: [TOI]
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