Page 17 - Banking Finance December 2016
P. 17
MUTUAL FUND
MUTUAL FUND
NEWS
NEWS
NEWS
NEWS
NEWS
SIPs in mutual funds GST could make mutual funds more expensive
doubles to 134 lakh Budget 2015 brought mutual funds dis- new goods and service tax (GST) regime
tribution under the ambit of 'services', will probably hike this tax to 18%. "I
The number of Systematic Investment
Plans (SIPs) in and hence eligible to can't say it is a burden...
mutual funds pay service tax. The However, large distribu-
service tax rate then tors may be able to bar-
has more
than doubled was 12.36% and was gain for higher commis-
to 134 lakh in paid using the reverse sion rates to ensure that
two-and-half charge mechanism. Un- their earnings don't take
years, primarily on account of in- der this, the onus of a hit due to this hike in
creased awareness among investors paying the service tax was with fund service tax rate," said Shyam Sunder,
and buoyancy in equity markets. SIP houses, which deducted the tax and paid Managing Director, PeakAlpha Invest-
is an investment vehicle that allows it to the government. It then gave the ment Services Pvt. Ltd.
investors to invest in small amounts net amount to the distributors. Begin- As per the Securities and Exchange
periodically instead of lump sums. ning April 2016, the forward charge Board of India (SEBI) rules, fund houses
mechanism has been put in place.
SIPs increased from 60 lakh as on 31 can pass on the service tax charged on
Beginning April 2016, the service tax management fee to the investors, by
March 2014 to 90.2 lakh at the end
of 31 March 31 2015. They increased was hiked to 15% (including Swachh increasing the total expense ratio to
further to 116.3 lakh at the end of Bharat and Krishi Kalyan cesses). The that extent.
the last fiscal.
Attractive valuations push mutual funds to large-cap
Besides, markets regulator SEBI has stocks
taken a number of steps to create
awareness regarding SIP investment Fund managers are increasingly moving towards large-cap companies in prefer-
including investors' awareness ence to smaller players as the recent volatility in Indian stock markets has brought
programme and extra incentives for most front-line stocks down to attractive valuations. An analysis of the total equity
those expanding into smaller cities assets under management (AUM) of mutual funds shows that fund houses have
and use of regional languages in in- been consistently increasing their exposure in large-cap firms with a correspond-
vestors education material related to ing fall in the share of mid-caps and small-caps.
mutual funds, he added. The number 69.25 per cent of the total AUM of equity and equity-linked savings scheme (ELSS)
of SIPs from other than top 15 cities was invested in large-cap stocks in the month of October 2016, up from 65.45 per
has risen from 29.6 lakh as on 31 cent in October 2015 and 57.12 per cent in November 2013. As per the Associa-
March 2014 to 63.1 lakh at the end tion of Mutual Funds in India (AMFI), the umbrella body of fund houses, the total
of 31 October 2016. equity AUM of the industry is Rs.4.68 lakh crore as on September 30, 2016.
BANKING FINANCE | DECEMBER | 2016 | 17
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