Investing in FMPsFixed Maturity Plans (FMP) are one of the simplest products available in mutual fund space. With bank FD like structure they offer investors fixed investment period, low churned portfolio, better returns and tax benefits. But being close ended funds, these are not available throughout the year for subscription. You can call FMP a cyclical product, when the corporate bond yields are high, we observe the demand surge for this product. And when the yields are low, we see sharp decline in demand for this product.

FMP launch in spurts

This can be observed from FMP issuances in the market. More number of FMPs are floated by mutual fund houses in the period of January to March every year. This is because at the year-end, demand for the bonds, government bonds & corporate bonds alike, reduces and bond prices decline thereby pushing the bond yields up. Bond prices and yields are inversely proportional to each other. Like every year, this year also there are ample number of FMPs floating in the market. We can see multiple FMPs being launched by fund houses.

Ideally, FMP investments are advisable when interest rates in the economy are expected to get reduced in the foreseeable future. As the key interest rates like repo rate reduces, the bond yields also expected to go down which then reduces investors’ gains. Thus, it is prudent to lock the yields when they are high by investing in FMPs to maximise your future returns.

Upcoming FMPs

Scheme Name Tenure in Days Open Date Close Date
UTI Fixed Term Income Fund – Series XXXI – VII (1155 Days) 1155 25-Feb 11-Mar
Aditya Birla Sun Life Fixed Term Plan – Series SJ (1135 Days) 1135 01-Mar 11-Mar
Kotak FMP Series 264 – 1200 Days 1200 01-Mar 11-Mar
Reliance Fixed Horizon Fund XXXX – Series 19 1184 01-Mar 15-Mar
SBI Debt Fund Series C-47 (360 Days) 360 06-Mar 11-Mar
HDFC Fixed Maturity Plan – 1126 Days – March 2019 (1) 1126 06-Mar 12-Mar
SBI Debt Fund Series C-48 (1177 Days) 1177 06-Mar 13-Mar
Edelweiss Fixed Maturity Plan Series 55 1140 07-Mar 12-Mar
IDFC Fixed Term Plan Series 177 1160 07-Mar 12-Mar
DSP FMP Series 252-38M  |  Start SIP Now 1140 08-Mar 14-Mar
ICICI Prudential Fixed Maturity Plan – Series 85 1149 Days Plan H 1149 08-Mar 13-Mar
ICICI Prudential Fixed Maturity Plan – Series 85 1149 Days Plan H 1149 08-Mar 13-Mar
Mirae Asset Fixed Maturity Plan – Series III – 1122 Days 1122 08-Mar 15-Mar
Reliance Fixed Horizon Fund XLI – Series 1 1140 08-Mar 13-Mar
IDFC Fixed Term Plan Series 179 3652 11-Mar 12-Mar
Kotak FMP Series 265 – 1194 Days 1194 11-Mar 13-Mar
Invesco India Fixed Maturity Plan Series 34 – Plan A 278 12-Mar 13-Mar
Aditya Birla Sun Life Fixed Term Plan – Series SK (1128 Days) 1128 12-Mar 18-Mar
Reliance Fixed Horizon Fund XLI – Series 2 94 13-Mar 14-Mar
HDFC Fixed Maturity Plan – 1127 Days – March 2019 (1) 1127 13-Mar 18-Mar
Aditya Birla Sun Life Fixed Term Plan – Series SL (1120 Days) 1120 19-Mar 26-Mar

So, should you invest?

Before making a long-term investment decision, it is important to understand if the current rates offer an attractive opportunity to invest or if investing now would be an opportunity loss in case the interest rates move upwards. In February 2019, RBI delivered an unexpected rate cut of 25 basis points and marked a beginning of a probable rate cut cycle.

RBI decides interest rates basis the inflation, measured by Consumer Price Index (CPI), in the economy which is at 2.19% as on January’18. This is the lowest CPI levels over past 16 months. This may pave way for further rate cuts as lower inflation means RBI has the leeway to provide lower interest rated and easy liquidity.

But even as the repo rate came down, the yields of government securities and in turn corporate bonds didn’t move. The 10-year G-sec yield is still trending at 7.35 – 7.40% levels which is 135 – 140 basis points (one basis point is 1/100th of a percentage point) higher than the repo rate, historically the average G sec – repo spread has been in the range of 30-50 basis points. Thus, there is a possibility that the current spreads would contract.

But when would this happen and why are bond yields remaining at such elevated levels when Indian economic growth has slowed down, inflation is low and interest rate is also declining? We think the reason is uncertainty owing to upcoming general elections which is spooking the market thereby reducing the bond demand and keeping the yields elevated (and bond prices low).

We believe this doesn’t look like a very promising scenario for retail investors to lock their investments for a longer tenure. There are many three-year FMPs available in the market but investing in such an illiquid instrument isn’t a prudent solution at this point in time. Small ticket investors should wait it out and instead invest in a product that demands lesser commitments.

Quarterly interval funds look like a good option for now. These funds are open for subscription & redemption quarterly. The structure of this product itself provides investors with much needed liquidity and choice of locking their investments or switch to a different scheme. Portfolios of these schemes also are not churned much. You can think of a quarterly interval fund as a bank FD that allows for additional investment or redemption every three months. Investors may also choose to invest in several other short-term debt funds which would provide them flexibility to alter their portfolio as and when required.

Priyanka Bharati

Priyanka Bharati is a senior personal finance analyst with RupeeIQ. She can be reached on