PNB Mutual Fund plans to launch two funds, income and growth, in the near future. The schemes have received approval from the PNBMF board and will soon be filed with SEBI. Says R K Rehani, managing director, PNBMF, ``Though the modalities are being worked out, both the schemes will be of small corpus. The income fund will promise some assured return.'' Rehani is upbeat about the future of the mutual fund industry. ``The outlook is pretty bright. Investors are beginning to repose faith in mutual funds and the trend is likely to gain monentum. The overwhelming reponse to the income scheme from UTI, which garnered around Rs 1200 crore, is a case in point.''

A number of listed funds are also on the comeback trail. While the gap between the NAV and the market price has narrowed considerably in a majority of the funds, a few of them have breached their yearly highs. Says Rehani, ``Not only growth funds but also income and balanced funds have registered gains. While equity funds have gained because the market has moved up, income funds, that managed to invest in high yield debt instruments, have become attractive in the scenario of falling interest rates.''

Although the interest rates have dipped, some income funds have promised high assured returns. Agrees Rehani when he says, ``these income funds may not necessarily invest in AAA-rated debentures now if they have to provide 15-16 per cent assured returns. A few of them may also suffer a squeeze in margins to provide returns.''

Rehani dismisses that funds from the PNBMF stable have fared badly. ``Our schemes have provided very liberal returns to investors including those which did not commit any returns. Though we could have ploughed back these profits, we decided to distribute them among our investors. In RIPS-90, for instance, we had promised a return of 12.5 per cent but paid 35 per cent.''

Rehani believes that income funds will continue to find favour with investors. ``Though some investors may shift to equity funds in the event of the stock markets looking up, risk-averse investors will continue to prefer income funds where the returns are assured.''

The stock market has failed to look up despite the passage of the budget. However, Rehani contradicts this perception and says that the dull sentiment is only for a short period.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.