MFs May Report 20 pc Returns In 2007

The buoyant mutual fund sector, which recorded as high as 40% returns last year, is all set to attract a major chunk of domestic share in 2007. Though, the sector, that is sitting over an all time high assets under management value (AUM) of Rs 3.4 trillion, may not see such high yields this year. During the last two years, they have grown nearly at the rate of 35-40%, matching the bull run in the stock market. The market may not be performing same in 2007, the returns from the equity schemes may narrow down to 15-20%. The sector, with 30 active players, raised nearly $8 billion via equity mutual fund schemes. Besides, relying on conventional equity and debt funds, study various alternatives like gold, realty, commodity-based funds as well as geographical opportunities like overseas investments in better performing economies.
Currently, size of the asset under management in the country is $ 65 billion against the country's GDP of $ 780 billion. Once, we totally shift to the market-controlled interest rate regime, not only the MF sector, but the investment scenario in the country will also undergo a sea change. With the Reserve Bank of India controlling the credit flow to the markets so as to check inflation and overheating of economy, the debt funds are currently finding it tough to compete against the bank deposits, as the hike in lending rates has subsequently been followed by increase in the deposit rates offered by banks. As the market may remain subdued in 2007, returns from the equity schemes may narrow down to 15-20 per cent.