Despite a remarkable degree of stability in the debt markets, monthly income plans continue to be weighed down by the non-performance of their equity component. For instance, after its maiden dividend of 0.9% in July, Sun F&C MIP is yet to declare a payout under the monthly option. In the case of Alliance MIP, payout is yet to bounce back to the peak monthly level of 1 per cent or 10 paise. The AMC had slashed the payout in October to 3 paise though now its up marginally to 4 paise for November.
Though its early days for Sun F&C MIP, its NAV continues to below face value at at Rs 9.96 on November 16. The fund holds a sizeable exposure to cash at 32 per cent apart from a 60 per cent exposure to debt and 7.16 per cent holding in equity, respectively. Investors in the dividend option of Sun F&C MIP may have to wait for some more time before the fund's NAV crosses the par level and the fund manager generates distributable profits.
On the other hand, Reliance and Kothari MIPs are yet to declare their maiden payouts. The MIP IPOs from the two AMCs had closed in September. While Reliance MIP has a NAV of Rs 10.20, Kothari MIP's NAV is perched at Rs 10.12. With the current level of NAVs, investors in these funds could soon expect a payout.
Though open-end monthly income plans do not assure returns, the absence of monthly payout is bound to annoy investors. However, it must be remembered that returns in open-end monthly income plans are a clear function of the performance of debt and equity markets. Hence, a better alternative for investors is to opt for the growth option of these funds and go for a monthly systematic withdrawal plan after one year. Apart from giving an opportunity for your investment to grow, this option is tax efficient as well.
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