Fixed Maturity Plans (FMPs) are in the news again with the regulator looking at further tightening norms, but investors may be losing interest.
FMPs remain on top of the mind for Securities Exchange Board of India (SEBI). The market regulator's Mutual Fund Advisory committee met on Friday to debate the further tightening of asset-liability norms, but amongst investors, interest in the product is waning.
AP Kurien, Chairman, Association of Mutual Funds of India, said, “The New guidelines will bring discipline among fund managers to structure their products almost perfectly."
SEBI is leaving no stone unturned to ensure that the recent run on FMPs remains a distant memory.
On Friday, keeping the FMPs on the top of its agenda, the SEBI meet discussed about a compulsory alignment of portfolio with scheme tenure, making trustees more accountable and segregating funds of corporate and retail investors.
Even with this, interest in FMPs is coming down. The more popular are income funds, as markets expect a further softening on interest rates and FMPs don't offer the upside.
Parijat Agrawal, Head of Fixed Income of SBI MF, said, "In a falling interest rate scene, the FMP rates are not attractive. Today the 90-day rate is at 7-7.25 per cent, which is not attractive. So there will be a slight slowdown in FMPs and people will move to open ended income funds."
Clearly, the market regulator is doing what it should, but a large section of investors believe that the FMP boom may be on its last leg.
Hence, the only lifeline now is the tax advantage and who knows when that might go.
FMPs remain on top of the mind for Securities Exchange Board of India (SEBI). The market regulator's Mutual Fund Advisory committee met on Friday to debate the further tightening of asset-liability norms, but amongst investors, interest in the product is waning.
AP Kurien, Chairman, Association of Mutual Funds of India, said, “The New guidelines will bring discipline among fund managers to structure their products almost perfectly."
SEBI is leaving no stone unturned to ensure that the recent run on FMPs remains a distant memory.
On Friday, keeping the FMPs on the top of its agenda, the SEBI meet discussed about a compulsory alignment of portfolio with scheme tenure, making trustees more accountable and segregating funds of corporate and retail investors.
Even with this, interest in FMPs is coming down. The more popular are income funds, as markets expect a further softening on interest rates and FMPs don't offer the upside.
Parijat Agrawal, Head of Fixed Income of SBI MF, said, "In a falling interest rate scene, the FMP rates are not attractive. Today the 90-day rate is at 7-7.25 per cent, which is not attractive. So there will be a slight slowdown in FMPs and people will move to open ended income funds."
Clearly, the market regulator is doing what it should, but a large section of investors believe that the FMP boom may be on its last leg.
Hence, the only lifeline now is the tax advantage and who knows when that might go.
Source: http://profit.ndtv.com/2008/12/13002932/FMPs-lose-vogue-as-investors-s.html
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