Budget 2019 disappoints mutual fund participants, investors

Many mutual fund participants are asking questions from the finance minister after the industry failed to get any sops from yet another budget.

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What happens to the Amfi wish list that reaches the finance ministry every year before the budget? Does finance minister ever go through it? Many mutual fund participants were asking these questions after the industry failed to get any sops from yet another budget. “Clearly, the finance minister hasn’t gone through the Amfi wish list,” said a prominent equity fund manager in a large private sector mutual fund.

Mutual funds were hopeful of getting 'their due' from budget 2019. Many mutual fund officials believed since the industry has proven their ability to channelise household savings to debt and equity markets, the government would offer some sops to incentivise mutual fund investors to increase their participation. However, they were in for a disappointment, once again.

Mutual fund industry had readied a long list of demands from the finance minister. The most important among them was roll-back of long term capital gains tax, re-introduced in the previous budget, on equity mutual funds. However, it didn’t find any mention in finance minister’s budget speech.

Similarly, mutual fund industry has been readying to launch new products like debt linked savings scheme along the lines of ELSS and pension products with tax benefits in the last few years. "It continues to be a status quo against our wishes, I would say. Even though most of us were not sure if there will be any announcements for the industry," said another prominent fund manager.

In fact, Amfi had sent a 23 page wish list to the finance minister. The industry standard organisation had listed 16 major proposals for both equity and debt mutual funds. However, none of these proposals were acted on in this budget. Here's Amfi's budget wish list for the mutual fund industry

"A debt linked saving scheme (DLSS) would have streamlined many things for the debt markets but it didn't happen. However, tapping on the international markets for the borrowing program is a welcome step," says Lakshmi Iyer, CIO-debt and co-head product, Kotak Mutual Fund.

The only move directly impacting the mutual fund industry, announced in this budget was bringing CPSE ETFs in line with the ELSS. "ETFs have proved to be an important investment opportunity for retail investors and has turned out to be a good instrument for Government of India’s divestment programme. To expand this further, government will offer an investment option in ETFs on the lines of Equity Linked Savings Scheme (ELSS). This would also encourage long term investment in CPSEs," Nirmala Sitharaman said in her budget speech.

However, mutual fund advisors are asking investors to be cautious about investing in CPSE ETFs.

Even mutual fund investors nursed hopes of tax breaks and new avenues for investing from budget 2019. See story: Mutual fund investors want FM to junk LTCG tax on equity in budget 2019. Needless to say, they too were disappointed with the budget.
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