It's the season of FMPs (Fixed Maturity Plans). Mutual fund houses launched as many as about 150 FMPs in March, 2012 as investors rushed to lock themselves into high interest rates & also take advantage of the double-indexation benefits provided by this product. This is thanks to the availability of the benefits of double indexation for those who stay invested in these instruments for a little over a year. That is, those who invest this March in an FMP which matures after 13-14 months, will get the benefits of both 2011 -12 and 2012-13.
Since inflation has been high throughout the year, the inflation index, too, will be high for this 2012- 13 financial year. As a result, when investors redeem the FMPs next year in April or later, they will get handsome indexation benefits. This will reduce their tax burden substantially.
Uncertain & volatile equity markets also contributed to demand for these fixed income products.
FMPs are close ended mutual funds with a fixed tenure & invest in a portfolio of debt products, whose maturity coincides with the maturity of the product. The primary objective of an FMP is to generate income while protecting the capital, by investing in debt & money market securities.
Currently, FMPs are offering as high as 9.5 to11%, in many cases better than bank fixed deposits.
The 4th quarter of 2011 -12 was robust in terms of FMP launches. During the period, the domestic fund industry launched about 315 FMPs. There is a rise of 30% in FMP launches in March this year compared with the same period last year (2011)
Since inflation has been high throughout the year, the inflation index, too, will be high for this 2012- 13 financial year. As a result, when investors redeem the FMPs next year in April or later, they will get handsome indexation benefits. This will reduce their tax burden substantially.
Uncertain & volatile equity markets also contributed to demand for these fixed income products.
FMPs are close ended mutual funds with a fixed tenure & invest in a portfolio of debt products, whose maturity coincides with the maturity of the product. The primary objective of an FMP is to generate income while protecting the capital, by investing in debt & money market securities.
Currently, FMPs are offering as high as 9.5 to11%, in many cases better than bank fixed deposits.
The 4th quarter of 2011 -12 was robust in terms of FMP launches. During the period, the domestic fund industry launched about 315 FMPs. There is a rise of 30% in FMP launches in March this year compared with the same period last year (2011)
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