Many individual investors are taking a hard look at liquid funds these days, say financial advisors. According to Association of Mutual Funds in India, or AMFI, the money managed by liquid and money market funds has gone up from Rs 1.29 lakh crore in July 2013 to Rs 2.46 lakh crore in November 2013.
The category has also given 4.58% absolute returns in the last six months ended January 6, says Value Research, a mutual fundtracking entity.
Though many companies and wealthy individuals have been using liquid funds to park surplus cash, retail investors have been reluctant participants due to the hassles associated with carrying out of frequent transactions in the offline world, say market participants. However, they say things are changing. Mutual funds are embracing modern technology to make transactions smooth and cost-effective.
“Introduction of one-time mandate allows investors to transfer funds with a help of an SMS to any scheme from investor’s bank account,” says Ajit Menon, EVP and head sales, DSP Blackrock Investment Managers. “Transacting online and using SMS on mobile can help investors put their idle money to best use through liquid funds,” he adds.
The current interest rate environment is also conducive for parking money in liquid funds. “Short-term interest rates are attractive. And liquid funds are best positioned to benefit from them,” says Deepak Panjwani, head – debt market, GEPL Capital. Short-term interest rates, indicated by the rate of interest (currently 8.5% to 9.0%) on three-month certificate of deposit (CD), are very attractive.