While the stock market has remained largely muted since January, retail investors have pumped in money into equity mutual funds by way of SIPs.
While the stock market has remained largely muted since January, retail investors have pumped in money into equity mutual funds by way of SIPs. “We have been seeing strong SIP flows of around Rs 8,300 crore each month since the start of the financial year, despite market volatility and negative market returns,” Ashwani Bhatia, CEO, SBI Mutual Fund told in an interview to Indian Express. However, Bhatia pointed out that the investment penetration in India remains very low. According to the expert, various measures are needed to promote long-term investing for at least the next 4-5 years. “One factor that will help is the roll-back of the long-term tax on equity mutual funds,” he said.
Further, Bhatia called for promoting debt mutual funds among retail investors. There is a need to move away from traditional savings such as FD, savings account, and chit funds to market-linked investments, which will help the economy’s development, he said. “We believe debt-linked savings scheme can help increase retail investor participation in fixed income market and help increase the depth of the debt market,” he added.
After FM Nirmala Sitharaman announced a mega corporate tax cut and other reforms last Friday, Bhatia noted that the measures will boost auto sector demand will be a sentiment booster for the markets. These set of reform announcements will help in bolstering growth in the economy. The government had announced four key measures including cutting corporate tax rate, withdrawing tax on share buyback, reducing the minimum alternate tax and providing tax relief to FPIs on capital gains. The finance minister slashed effective corporate tax to 25.17% inclusive of all cess and surcharges for domestic companies, subject to condition that such companies will not avail any exemption/incentive.
Further, Bhatia noted that the current slowdown in the Indian economy is a reflection of the economic cycle, global slowdown and the geo-political issues around the globe. We believe that the slowdown is a temporary event, and the government’s efforts should help revive growth. Stability in other macro factors such as benign inflation, contained CAD, comfortable forex reserves and stable rupee reflect positively on India’s long-term prospects.