In the current stock market chaos, there is no sector which has not got beaten. Also, with bond yields heading north and interest rates ruling high, fixed maturity plans (FMPS) have become the flavor of the reason. All the leading fund houses have come up with a host of new FMP’S in the part two months. Though the returns are not assured in FMP’S, investors can expect a return in tune with the current interest rates. These close-ended schemes seek to generate regular returns by investing in debt, government and money market securities that mature in line with the duration of the scheme. FMP’S also attract lesser tax when compared to fixed deposits.
Equity markets have become quite volatile and this is the reason where a new trend has arrived whereby investors are now putting money in debt funds. Fund managers expect fixed income schemes to remain popular given the uncertain conditions in the equity markets. The total AUM’S (equity, debt, cash and hybrid) between January 31 and June 30, grew a mere 2% compared to the 17.7% jump witnessed for the same period in 2007. However, this is a cyclical phenomenon and equity markets would rebound in a few months.
Debt funds have become attractive since interest rates have gone up. Institutions too want more stable funds now and are going to the retail market with debt schemes.