Debt investments go north in Gujarat

Monday, 13 January 2014 - 12:37pm IST | Place: Ahmedabad | Agency: DNA
Volatile equity mkt forces investors to change asset allocation; non-equity investment in state rises by Rs7,249 core in a year.

Change is the only constant not only in life but also when it comes to business trends. A fact that a detailed look into the data will reveal.

As per the data, investments from Gujarat in mutual funds between September 2012 and 2013 have increased by Rs6,190 crore. However, a close look shows that there is a clear shift in investment practices of Gujaratis. They now seem to be more inclined towards investments in debt and other instruments, while equity investments are out of favour.

According to the industry data, total mutual fund investments in equity schemes in Gujarat has declined by 6% or Rs1,059 crore — signifying withdrawal of money. At the same time, investment in non-equity schemes — debt, quasi debt and exchange traded funds investments — has increased by a whopping 30% or Rs7,249 crore.

The total investment made by Gujaratis in all non-equity schemes put together increased to Rs31,312 crore at the end of September 2013 compared to last year’s Rs23,832 crore.

Reason behind this shift of interest to mutual funds is believed to be higher interest rates and volatile equity markets. In the current scenario, debt and liquid schemes yield better return compared to equity funds.

Equity market is subject to market risks while in other investments, the risk is lower and return is almost stable. “There is a clear shift in the way investors look at their asset allocation. When you are getting 9% tax free return for longer term why would one choose to invest in an asset that inherits risk as well as tax,” a city-based investment advisor said.

For equity index funds, the return is between 6% and 8% while the return in debt funds is 12% to 25% in the last one year. 

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