The Association of Mutual Funds of India (AMFI) is running a campaign in the ongoing Indian Premier League matches to highlight the benefits of investing in debt mutual funds.
Finance Act 2023 increased the tax rate on capital gains from debt funds, making them ineligible for long-term capital gains tax and indexation benefits, and now taxable at income tax slabs, debt funds had lost some favour with investors. But AMFI is trying to revive the interest by highlighting the benefits of investing in debt funds, Venkat Chalasani, Chief Executive, AMFI said in an interview with Outlook Money. The lowered government borrowing and the upcoming inclusion of Indian government bonds in JP Morgan Government Bond Index-Emerging Markets (GBI-EM) have made this an opportune moment to invest in debt funds.
Fixed Income Mutual Funds Sahi Hai Campaign was launched in April 2024, with the advertisements first being released on the Indian Premier League (IPL). You can see the Mutual Funds Mein Fixed-Income Wali Baat catchphrase everywhere during the ongoing Indian Premier League (IPL) season.
The Mutual Funds Sahi Hai campaign had previously popularised mutual funds in every corner of the country. A similar move is now being planned by AMFI to boost investment in debt mutual funds. Venkat Chalasani, Chief Executive (CE), AMFI in an interview with Outlook Money said, "Fixed Income Mutual Funds Sahi Hai Campaign was launched in April 2024, with the advertisements first being released on IPL."
"Mutual funds are still perceived as ‘equity only’ offerings by a large section. There is a need to popularize the other categories that Mutual Funds have to offer like Fixed Income Funds, also called Debt Funds," Chalasani said. A debt-oriented scheme invests in fixed-income instruments such as bonds issued by the government and corporate, debt securities, and money market instruments, etc. AMFI's decision to launch this campaign is influenced by the low retail participation in debt-oriented schemes compared to equity-oriented schemes, Chalasani said.
AMFI feels that a persistent effort will be needed to drive more investors into debt mutual funds. "Mutual Funds Sahi Hai Campaign was launched in 2017 and has gained a lot of momentum over the years to become a popular investment instrument that offers wealth creation in the long run," Chalasani said.
"We launched the Fixed Income Funds Campaign last month and it is too early to talk about the effect. It has taken years for the Mutual Funds Sahi Hai campaign to generate the phenomenal results it has created in terms of awareness of the MF category. The Fixed Income Funds campaign has definitely created curiosity in the minds of the people. The aim is to convince savers in non-financial assets or those keeping idle cash to come to the mutual fund industry," AMFI Chief Executive said.
"Through this campaign, we hope more retail investors learn about fixed-income funds and gain access to fixed-income securities that were traditionally accessible only to institutional investors. This democratization of access to debt markets can help individuals achieve their financial goals effectively," he added.
Why is this campaign important and why should debt fund investments be prioritized?
Chalsani: Fixed-income funds offer a way to diversify investment portfolios beyond traditional options. While equity funds, gold, real estate, fixed deposits (FDs), small savings schemes and traditional insurance policies have been more popular among investors, fixed-income mutual funds have often been overlooked
The campaign will focus on the advantages and features of fixed-income mutual funds. It positions debt funds as suitable for retirement planning and generating regular income for low-risk investors. The concept of a Systematic Withdrawal Plan (SWP)’ has also been introduced to help investors understand the importance of including fixed-income funds in their portfolios for income generation and stability.
Overall, incorporating debt funds in a portfolio can help achieve a balanced investment strategy by diversifying risk, generating income, preserving capital, and enhancing tax efficiency. The specific allocation to debt funds should be based on individual investment objectives, risk tolerance, and financial goals.
What are the campaign moves made so far and your target audience?
Chalasani: The campaign talks to people unaware of fixed-income mutual funds and their benefits. In this phase of the campaign, we have targeted retired people and people about to retire who are looking for low-risk and regular-income investment options. Investors looking to diversify and receive a second income, businessmen investing in informal avenues and investors who invest in unregulated investments are also part of the target group.
Our last campaign ‘Maidaan Mein Utro’ encouraged potential investors to ‘get onto the field of Mutual Funds’. With this campaign, we hope that people who have been traditionally just ‘saving’ in financial and non-financial assets, consider fixed-income funds as their first step towards ‘investing’.
The ‘Fixed Income Mutual Funds Sahi Hai’ campaign is the industry’s first step towards introducing the category of fixed-income mutual funds and it will take a lot more effort, engagement, and various forms of investor outreach to make an impact and bring about a change in the traditional mindset.
Why Does Investment In Debt Make Sense Now?
The lower supply of government bonds, with the government pegging FY25 borrowings at Rs 14.13 trillion (8 per cent lower than the previous year), will price the bonds higher and yields will go lower. This is expected to positively impact existing bonds and debt mutual fund returns in the long term. Additionally, the inclusion of Indian government bonds in JP Morgan Government Bond Index-Emerging Markets (GBI-EM) is expected to attract more investment in the Indian debt market. The move is also expected to benefit long-term debt funds, dynamic debt funds, and long-duration G-sec funds
