Monthly plans start giving positive returns

The Monthly Income Plans (MIPs), which had invited a lot of investor ire last year when they skipped regular dividend payouts, are back in favour.

In the past six months, their performance has improved substantially. The category average return on MIPs is at 9.4 per cent in the last six months (net asset values as on May 13) as compared with the previous six months return of (-4.31 per cent), according to Value Research, a mutual fund tracking agency.

Market experts attribute this to the fact that MIPs — both equity and debt — have started doing well in the recent times. MIPs invest 80 per cent of the money in debt instruments and the rest 20 per cent in equities. A small equity exposure is maintained to earn something extra.

The debt market started improving since November when interest rates started falling, thereby improving returns on debt papers. Dhawal Dalal, head (fixed income) DSP Blackrock said, “From the beginning of this year bond yields have gone down. MIPs have allocation in government securities and corporate bonds.

Since the second week of March, even the stock markets have started doing well. Therefore, both these have contributed to good returns in the MIPs.

As far as individual schemes go, Birla Sun Life MIP has given 16.47 per cent return in the last six months. In the previous six months, it had returned — 6.2 per cent.

Similarly, ICICI Prudential MIP has given 16.03 per cent compared with 7.02 per cent in the previous six months.

Alok Singh, fixed (income structured products), Fortis Investment Management, said, “MIP is quite good from a long-term investment point of view as they are out performing the debt funds now.

Market experts said that such schemes were ideal for risk-averse investors because the equity market still seems quite shaky. Over a five-year period though, equity schemes will easily outperform them.