India FMP Mutual Funds

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India FMP Mutual Funds landscape|Are FMP MF debt IPOs a good place to invest in India today?

india fmp mutual fundsThe doubts and rumours about FMP Mutual Funds in India, have led many High Networth Investors (HNI investors) of Mutual Funds in India to rapidly exit Fixed Maturity Plan schemes

The question about India FMP Mutual Funds is : Are new FMP mutual funds worth investing or should one keep off fixed maturity plans completely?

SEBI ‘s actions regarding India FMP Mutual Funds have been ambivalent

sebi fmp mf actionsGiven the liquidity crisis in MFs following panic redemptions in India FMP Mutual Funds, SEBI had instituted some urgent steps to prevent the collapse of MF houses and rein in the panic in India FMP Mutual Funds

Some of SEBI’ s actions regarding FMP Funds

  • SEBI offered a line of credit to Mutual Fund Houses so that the panic withdrawls from India FMP Mutual Funds should not be left to affect the liquidity of the MF houses. This,of course, was an excellent move from SEBI
  • SEBI started some serious regulation of India FMP Mutual Funds. One of the SEBI proposals suggested that Fixed Maturity Plans in the future should not have an option of allowing withdrawls premature to the tenure of the FMP. This SEBI move regarding India FMP Mutual Funds was a controversial step that seemed to focus on supporting the Mutual Fund Houses that were not doing a good job of handling the Fixed Maturity Plan Fund portfolios rather than supporting the cause of investors in these FMP Mutual Funds
  • As a sop to investors in India based FMP Mutual Funds, SEBI has regulated compulsory listing of all close-ended debt funds such as Fixed Maturity Plans in stock exchanges. While, in principle, SEBI ‘s move regarding compulsory listing of close ended funds such as FMP Mutual Fund Schemes seems to be a good idea, the expected absence of trading of these FMP debt securities makes SEBI’s intentions unviable.

So, what is the future of India based FMP mutual funds ? FMP vs FDs again

One has to put the current problems of FMP funds in perspective to the success of Indian FMP Mutual Funds and the current situation in the equity market. Given the current popularity of bank FDs and debt options, one really cannot deny the inherent tax benefits of FMP mutual funds in India even compared to FDs. Given the tax benefits of India FMP mutual funds compared to FDs, some investors in India will always prefer FMP mutual funds to bank Fixed deposits.

Also, given the current equity market recession,the debt based FMP mutual funds vs equity funds comparison may favor Fixed Maturity Plans for some HNI investors.

SEBI ‘s regulatory focus on India FMP mutual funds may encourage investors in Fixed Maturity Plans

SEBI’s recent involvement with regulations regarding India FMP mutual funds may actually suggest to investors that close ended funds such as FMP Mutual Funds are being seriously monitored by SEBI. Also, SEBI’s actions to insist on transparency in FMP Mutual Fund portfolios is a step in the right direction and will mollify investors in fixed maturity plans and suggest that FMP investments are quite safe

In summary, while SEBI’s actions regarding lower liquidity of FMP Mutual Fund Schemes may cause a short term dent in FMP investments,in the medium term, FMP MF investments will remain popular in India

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