Asset mobilisation by fixed maturity plans (FMPs) dipped to its second lowest in the last six financial years as interest rates declined post FY12.

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, data collated from Value Research, a mutual fund tracker, show. FMP mobilisation was the highest in FY12, a year when interest rates were on an upward trajectory. Besides FY12, FMPs have mopped up more than R1 lakh crore in FY08, FY09 and FY11.

FMP NFOs slowed down considerably in the second and third quarters of FY13 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.

Total 321 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.

The appetite for FMPs also rose owing to the double-indexation tax benefit offered by such funds, said experts. FMPs mopped up nearly R43,000 crore between January and March, with R23,800 collected in March.

The outlook for FMPs this fiscal looks bleak as the central bank is poised to cut key interest rates further. During FY13, the Reserve Bank of India reduced key policy rates by 1% to 7.50%. According to market participants, investors will flock to FMPs this fiscal only if the spread between the 3-month and one-year CD rate improves.

?The spread between the three-month and one-year CD rate, which is currently around 20-25 basis points, will have to improve to 50 bps at least for investor appetite to improve,? said Dwijendra Srivastava, head, fixed income, Sundaram MF. Three-month CD rates are currently hovering around 8.25% compared with one-year CD rates of 8.50%. FMPs are preferred by investors in a rising interest rate scenario, since they are able to lock into high yields, and provide more stable and predictable returns to investors at the time of maturity.