Banks' FDs back on fund managers' radar

Fixed income fund managers pumped in 70% more in FDs during Jan-Nov period

Banks’ fixed deposits (FDs) are back on debt fund managers’ radar. Although India's equity fund managers have long been avoiding banking space, their counterparts in the debt segment are busy increasing exposure to FDs.

While allocation of overall debt assets jumped 1.4 per cent, from 4.14 per cent to 5.54 per cent; in absolute term allocations increased by about Rs 16,000 crore or 70 per cent in the fixed deposits to Rs 37,946 crore - one of the highest in recent years.

Further, government securities (G-Secs) continued to remain among the top investments of debt fund managers. With hopes of rate cuts, sooner or later, fund managers deployed a massive sum of Rs 67,149 crore, an increase of a little less than Rs 20,000 crore last year, till data is available from the Securities and Exchange Board of India (Sebi).

Investors were wary of making investments in equities while debt segment witnessed a whopping rise in assets. As on November 30, 2013 debt assets under management (AUM) in fixed income stood at Rs 6.85 lakh crore, a rise of 28 per cent, against Rs 5.36 lakh crore in the year-ago period.

Public sector companies’ bonds were yet another favourite of fund managers, who bought the bonds by pumping in fresh Rs 11,000 crore, taking the overall investment in the category to Rs 44,082 crore. The allocation was up by a quarter of a percentage point.

However, banks' certificate of deposits (CDs) took a back seat among debt assets' allocation. Fixed income heads of the industry chose to drastically cut exposure to CDs by nine per cent to 26.5 per cent, thereby decreasing the sum invested to Rs 1.82 lakh crore in November 2013 against Rs 1.9 lakh crore a year ago.

During the January-November period in 2013, folios in the equity segment kept closing, debt category saw a rise of 600,000 folios, taking the overall investors' base in the category to 6.63 million.