25,000 cr coming to investors soon

LARGE PART OF FIXED MATURITY PLAN REDEMPTION MONEY IN APRIL-JUNE MAY FLOW INTO STOCKS; SOME ALSO INTO REALTY

INVESTORS may soon have Rs 25,000 crore in hand to buy shares, real estate and gold, thanks to the redemption of fixed maturity plans (FMPs), a kind of close-ended mutual funds, in the first quarter of the current fiscal.
    As positive rallies of the market during the last one month have
buoyed the investors' sentiment, a major chunk of the money being released from the redemption of FMPs between April-June, 2009, would find its way into the Street. And that is the view shared by an entire line up of mutual fund CEOs, analysts, brokers and consultancy companies, which SundayETspoke to.
According to the data provided by Value Research India, a firm tracking mutual funds in India, more than Rs 10,000 crore is going to come into the hands of investors in the next two months, which is currently locked up in the FMPs. Also, Rs 16,492 crore worth of FMPs had already matured in April alone.
Vikas Arora, associate director at KPMG India, feels that with equity market going up and positive signals coming in, investors with the FMP proceeds would enter the market. There is, however, a catch. He says that the outcome of elections will decide the final way forward.
    Aseem Dhru, MD & CEO of HDFC Securities agrees. According to Mr Dhru, due to general decrease in interest rate and simultaneous boost in the performance of the equity markets, investors are expected to park a major chunk of their money into the equity market.
    So while investors were shifting towards the debt market during 2008, due to the poor performance of the equity market, they have now started looking at equities. During the last couple of months, equity markets have started picking up. In April, the Sensex gave a return of more than 15%, which is much higher than an absolute indicative return of 10-12% from FMPs with maturity period of around one year.
    Motilal Oswal, CMD of Motilal Oswal Fin Services, says a part of FMP redemption money would definitely be allocated to the equity market. "Investors were apprehensive to put money in the equity market last year, and rather invested it in the debt market. Now things have changed," he said. Sudip Bandyopadhyay, MD of Reliance Money, feels around 20-25% of this may go into equity immediately.
MATURE ENOUGH Rs 25,000-cr FMPs to be redeemed in April-June
Rs 16,492-cr FMPs matured in April alone
Rs 10,000 cr to come into investors' hands in May-June
Falling interest rates & India Inc's better-than-expected Q4 results to woo investors
Election outcome to decide final way forward
In April, Sensex gave return of over 15% while 1-yr FMPs' absolute indicative return was 10-12%
From March, FIIs invested Rs 7,038 cr in equities
FIIs sold Rs 3,930-cr assets in debt segment FIIs too take shine
FOR the rest, investors may park the money into safe instruments till there is more clarity in terms of political stability, he added.
    Better-than-expected results in Q4 have also buttressed the investors' confidence. Most companies have posted better results in comparison to the previous quarter. Amitabh Chakraborty, president, equity at Religare Securities, said, "The stimulus package is working and results in the coming quarters will be even better. The valuations are still attractive and I am also expecting a stable government. This is the time when one should increase the beta of the portfolio, which means one should be a little aggressive in their investment strategy," added Mr Chakraborty.
    In fact, foreign institutional investors (FIIs) have also started pumping money into the market. Interestingly, FIIs are more confident of equity than debt. Since the beginning of March, these investors have invested Rs 7,038 crore in equities, though they sold assets worth Rs 3,930 crore in the debt segment.
    Equities may not be the only resort for investors. Real estate can also attract some amount of this money. According to Anup Bagchi, ED at ICICI Securities, this money was idle and while a large part of it may go to real estate, the rest could go to equity. According to Kaustuv Roy, ED of Cushman & Wakefield, a real estate consultancy firm, most of the money may go into equity, however, some of the large ticket investors may consider allocating a part of the portfolio into the real estate.
    Nevertheless, there are a few experts who do not buy the theory altogether. Some of them believe that a part of the money that came into the FMPs last year was from conservative investors, and hence that money would go to other debt instruments. According to Rajiv Deep Bajaj, vice chairman & MD of Bajaj Capital, there are a lot of uncertainties around and hence, a part of the amount may go into debt schemes only. However, it can not be ruled out that a part of the money will also find its way to equity market."
    So, here's a strong case of a huge cash flow from conservative pockets to risky bets.

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