Rupee at 62: Why it's a good time to invest in FMPs

The economic environment of the country is in a tight spot. On one hand the rupee has depreciated and is now hovering around the Rs 62 mark. On the other hand the apex bank’s recent measure has caused liquidity tightening. And short-term rates have also seen a hike by as much as 150 basis point in certain instruments. This has resulted in fund houses launching their Fixed Maturity Plans (FMPs), notes the Economic Times Wealth report here.

In fact, investing in FMPs is now a good idea, reason being, FMP invests in instruments like Certificates of Deposits, and money market instruments, which are currently offering yield of 9.5-10 percent. This means your FMP investments could give you double digit returns in a year’s time frame.

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From a tax- efficiency point of view, FMPs work well too. After all if you invest in FMP plans of more than a year, you get indexation benefits. FMPs investments for a horizon of more than a year will give better tax benefits than Fixed Deposits. If you invest in FMPs for less than a year, then the tax benefits are almost at par with FDs.

As mentioned earlier, almost all fund houses have launched their new FMPs in the last month, so you as an investor, are spoilt for choices. While choosing which FMP to invest in, keep in mind the time frame for which you want to invest. Ideally for risk averse investors a longer term FMP works better. Also check the underlying paper and sectors the FMPs are investing in.

You can read the full ET Wealth report here.