The jury is still out on that, but here is the result of charting the recent trend. Banks may just have beaten mutual funds in attracting investors to their products in recent days and weeks.

The risk-averse investors as well as many who are more bold, have not been able to resist the temptation of near-10 per cent interest rates being offered by banks for short-term fixed deposits after the Reserve Bank of India hiked the repo rate and the cash reserve ratio a fortnight ago in an attempt that has taken liquidity out of the system affecting, especially the real estate sector and the corporates at large by making money very expensive to borrow.

Huge collections have been garnered by banks due to the new trend that has been fuelled by inflation and an economy that is regarded by many as ‘hot’, while an equal number say that raising interest rates by the RBI are the wrong steps as it would hurt a galloping economy, even bring it to a sliding stop.

Nevertheless, statistics show that total MF AUM was Rs 339,051 crore in January 2007, it moved to Rs 353,309 crore in February and in March it was Rs 326,388 crore.

According to an investment planner, he has been advising his clients to get rid of many of their MF holdings and push the money into short-term fixed deposits, especially if the MF scheme is not performing well. He says he is still sitting on the wall and has not really made up his mind about it for the near term. “That will be decided after the RBI’s April 24 meet, where the trend may become more clear and then I will decide what to do with MF schemes.” he said.

Compare the above to the 2006 figures: In January 2006, the total AUM of the MF industry was Rs 207,110 crore, in February of that year it climbed to Rs 216,844 crore and in March it was Rs 231,325. Growth was flowing, month after month, yet in the year 2007, post-February, there is a huge blip.

While analysts indicate that it would be hard for them to say exactly why that happened, but off the record, they did indicate that FDs may be the reason and at the same time indicated a host of other reasons too.

However, they hurried to say that since inflation is falling and expectations from the RBI is not to pull out any more rate hikes in the near future and that means investment in equity via mutual funds will again become an attractive option for the retail investors. In fact, they said, since the retail investor does not have too big an amount to play with, the 9-plus per cent guaranteed interest rates on offer for FDs (10 per cent for senior citizens) would have been attractive. Although, the same should apply to big money wielders too, but the analysts were chary about saying so.