Debt funds enjoyed a good run in FY13 as most categories gave over 9% returns in a benign interest rate environment. Gilt medium-and-long-term funds, together with income funds, emerged top performers, giving double digit returns for FY13. Gilt medium-and-long-term funds gave average category returns of a little over 11%, while income funds gave returns of about 10.5%, data collated from Value Research show.
?These funds benefited from the decline in repo rates of 100 basis points during FY13. The active fund mangement of the fund managers helped boost returns,? said Dwijendra Srivastava, head, fixed income, Sundaram MF.
During FY13, the Reserve Bank of India (RBI) reduced key policy rates by 1% to 7.5%. The 10-year benchmark yields have moved from about 8.7% to 7.8% in FY13, a decline of close to 100 basis points. One-year CD rates have declined from 10-10.5% to 9.5% the same period. Dynamic bond funds gave returns of 10.l5% in FY13 compared with returns of 9.5% in FY12. Total assets of Morningstar Intermediate Bond category comprising mid-to-long-term debt/income funds grew around 580% in FY13.
Liquid funds gave returns of 8.88% in FY13 against 8.96% in FY12, helped by attractive short-term rates. Three month CD rates are currently hovering at around 8.25% levels. Asset mobilisation by fixed maturity plans (FMPs) dipped to its second lowest in the last six financial years . While the number of FMP new fund offers (NFOs) remained healthy at 874 in FY13, FMP asset mobilisation dipped 46% to nearly R71,000 crore from R1.31 lakh crore in FY12, according to Value Research.
FMP NFOs slowed down considerably in the second and third quarters as investors put their money in duration funds owing to the dip in interest rates. In FY13, one-year FMPs with a 100% CD portfolio delivered returns of about 10% versus 11.5% for open-ended income funds, said experts. A total of 321 FMP NFOs were launched in the first nine months of the fiscal compared with 553 in the last quarter. The pace of NFO launches in the last quarter of the fiscal grew as one-year CD rates rose from about 8.5% at the end of December to about 9.5% in March, making FMPs attractive.