CEO Speak

The Union budget is one of the most eagerly anticipated event not just in the financial, corporate and political world but also is keenly followed by the common man. While the budget showcases many economic and financial data points, status of the financial health of the government and social welfare schemes, one does look forward to the budget with an ever green anticipation of “What is in it for me?”

Notably, this year one of the relevant changes with respect to the interest of investors in Mutual Funds in India is the re introduction of “Long Term Capital Gains Taxes”. While the LTCG tax rate now is 10% above a gain amount of Rs 1 lakh in a financial year, the government has taken efforts and measures to ensure that there would be no tax applicable to investment decisions made prior to 31stJan 2018. Over the years, there have been several changes in taxation laws, however, investors have taken these changes in their stride and our belief is that for this change also an investor will get used to the new norms of LTCG tax rates and still continue his investments with the Mutual Fund industry as equity funds still continue to remain a tax efficient and comparatively higher return generating segment.

Hence knee jerk reaction to the current situation may not be advisable. However one must review their portfolio from time to time in order to monitor one’s investments. Investments must be made basis financial goals and time horizon for the customer. We are increasingly finding people taking note of LTCG changes and adjusting their return expectation accordingly. Basics like diversifying into different asset classes goes a long way to make the customer comfortable. Also investment decisions must be made with clear financial goals in mind, hence, longer time horizons in the equity mutual fund space will always help in wealth creation for the investor.

With the governments continued focus of structural and economic reforms, it istrying to ensure that India continues to be an investment friendly environment. However, the markets may remain volatile for a few months to come after a good run in the previous year. Investors pumped in over Rs 1 lakh Crore in January 2018, driving the industry assets to an all time high is Rs 22.41 Lakh Crores ( source : AMFI). Investors are clearly moving from traditional asset classes to financial asset class which is visible in the surge in the mutual fund industry’s increasing AUM.It has also been helped by a lot of awareness campaigns done by the industry players and AMFI which is also resulting into increased participation from the retail segment.

With some volatile times in the markets ahead our advice to investors will be to keep focussed on their original financial goals basis which the investments would have been made and not get panicked by any sudden movement in the markets. Keep reviewing your portfolio from time to time as a prudent investment practice and do not base your decisions on hearsay and herd mentality.

Disclaimer – This document is for general information only and does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this information. This document provides general information on performance; financial planning and/or comparisons made are only for illustration purposes. The data/information used/disclosed in this document is only for information purposes and not guaranteeing / indicating any returns. This material provides general information and comparisons made (if any) are only for illustration purposes. Investments in mutual funds and secondary markets inherently involve risks and recipient should consult their legal, tax and financial advisors before investing. Recipient of this document should understand that statements made herein regarding future prospects may not be realized. Recipient should also understand that any reference to the indices/ sectors/ securities/ schemes etc. in the document is only for illustration purpose and should not be considered as recommendation(s) from the author or L&T Investment Management Limited, the asset management company of L&T Mutual Fund or any of its associates. Recipient of this information should understand that statements made herein regarding future prospects may or may not be realized or achieved. Neither this document nor the units of L&T Mutual Fund have been registered in any jurisdiction except India. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.