Interest in debt funds revives: CRISIL

Improvement in liquidity conditions along with revival in investor confidence has helped the Indian mutual fund industry tide over the aftermath of the liquidity crisis that occurred during the third quarter of FY09,says a recent note from rating agency CRISIL. The strong recovery by the industry is reflected in the growth in assets under management (AUM) of debt schemes: AUM has more than doubled since October 2008 to Rs.5.68 trillion as on October 31,2009.

CRISIL has also observed a shift in investor preference towards relatively shorter-term schemes,increased investment in higher-rated credit instruments,and high demand for debt instruments issued by banks. These conclusions are based on an analysis carried out by CRISIL on 61 debt mutual fund schemes rated by it (excluding fixed maturity plan and interval funds).

Of CRISIL-rated schemes,the ultra short-term funds have experienced the lion’s share of increase in AUM. While improvement in liquidity contributed to increased demand for debt schemes,introduction of new guidelines issued by the Securities and Exchange Board of India (SEBI) and capping of the maturity of investments in liquid schemes resulted in increased preference for ultra short-term funds. The share of liquid schemes has come down from 49 per cent to 27 per cent of AUM.