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May 20, 2000
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Leading debt funds grow 195% in 1999-2000Aabhas Pandya The brouhaha for equity funds notwithstanding, debt funds have emerged as the silent winners for fiscal 2000 as far as the collection figures go. While equity funds stole a march over their debt counterparts with dazzling returns, income funds continued to receive strong inflows during the year. It was only towards the fag end of fiscal 2000 that investors poured an estimated Rs 20 billion in technology funds. While the unit capital of some of the equity funds has shown a startling jump, it does not translate into significant numbers since the growth has come on a small base. The analysis is based on the change in unit capital of the flagship equity and debt funds of eight asset management companies - Alliance, Birla, DSP Merrill Lynch, Kothari Pioneer, Prudential, Sun F&C, SBI Funds and Templeton. For the year ended March 31, 2000, the combined unit capital of the eight debt funds has vaulted by 195 per cent from Rs 17.55 billion to Rs 51.87 billion. In the same period, the corpus or the size of the funds has expanded from Rs 23.36 billion to Rs 6873 billion. On the other hand, the unit capital of the equity funds has grown by a mere 41.12 per cent from Rs 6.43 billion to Rs 9.08 billion. However, assets under management have jumped by a whopping 274 per cent from Rs 11.16 billion to Rs 41.76 billion, thanks to galloping net asset values (NAVs) on the back of a rising market in 1999. The investment pattern clearly suggests that debt funds continue to be a preferred medium though equity funds have been successful in breaking fresh ground. As the number of applications in technology funds would show, a large number of investors were beginning to tune into equity funds but the crash in the stock market has been a setback. Although equity funds managed to attract large investments on the back of hefty dividend payouts, the money immediately moved out since these investments were made for the purpose of dividend stripping. The 1999-2000 Budget had made dividends from open-ended equity funds tax-free while the payouts from debt funds were taxed at 11 per cent. However, despite the dividend tax, debt funds continued to witness inflows from risk-averse investors and the corporate sector. Corporates also normally keep away from equities and equity funds and prefer to keep their money with debt funds. In 1999-2000, the corporate sector had the advantage of turning a part of its investments tax-free by way of dividends from debt funds (being taxed only at 11 per cent) whereas the interest income from other debt investments is taxed at 38.5 per cent. Although corporates continue to have this advantage, the yawning gap stands reduced with the increase in dividend tax on debt funds from 11 to 22 per cent. Debt funds also received investments under sections 54EA and EB on account of a number of mergers and acquisitions last year. Besides, there was inflow of initial public offer money from companies, which tapped investors with primary floats in fiscal 2000. ''There were a number of IT companies last year which mobilised money for acquiring companies or setting up offices abroad. These companies temporarily parked their money in debt funds and a part of it was reflected as on March 31, 2000,'' says a fund manager. ALSO SEE: Debt funds turn attractive
Source: Value Research |
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