Their say on the budget | Value Research While markets tanked, mutual fund industry is largely receptive of the Union Budget 2013-14

Their say on the budget

While markets tanked, mutual fund industry is largely receptive of the Union Budget 2013-14

Mumbai, February 28: The much-awaited Union Budget 2013-14 was low on populism and failed to cheer the markets with the Sensex going below the 19,000 levels. The biggest takeaway from it was the liberalisation of Rajiv Gandhi Equity Saving Scheme (RGESS) which was announced during the last year's budget. The FM also announced a reduction in securities transaction tax (STT) in Exchange Traded Funds (ETFs) and allowed pension funds to invest in equity markets through ETF.

Read on to find out what people in the mutual fund industry are saying:

A Balasubramanian, CEO-Birla Sun Life Mutual Fund
"Given the current tough situation, the budget has been positive and in line with expectations. Clarity in Rajiv Gandhi Equity Saving Scheme (RGESS) is a step in right direction. FM has also focused on infrastructure debt funds and announcement of inflation indexed bonds might also help in future. All these measures are likely to bring small retail investors to the capital markets. It is also quite possible that allowing pension funds to invest in equity markets through Exchange Traded Funds (ETFs) will bring money to the industry."

S Naren, CIO-Equity, ICICI Prudential Mutual Fund
"The budget is in line with what rating agencies were anticipating. However, I would also say that, it is a Budget to reduce current account as well as fiscal account deficit and start the investment cycle. On the mutual fund side it was completely disappointing as we were anticipating more liberalisation on Rajiv Gandhi Equity Saving Scheme (RGESS). Also proposed increase in dividend distribution tax (DDT) on debt funds from to 25 percent from 12.5 percent might impact overall returns."

I V Subramaniam, Director, Quantum Mutual Fund
"I was not expecting any big bang announcement in the budget. So I can say the announcements were in line with what I had personally expected. To continue spending in rural India and education will be positive for our country in longer duration. Going by the budget speech, I believe fiscal deficit target of 4.8 per cent can be achieved. The steps taken to liberalise Rajiv Gandhi Equity Scheme (RGESS) coupled with reduction in Securities Transaction Tax (STT) and allowing pension funds to invest in Exchange Traded Funds (ETFs) are positive steps that will bring inflows into the capital markets."

Rajat Jain, CIO-Principal Mutual Fund
"One of the big macroeconomic challenges before the economy today is the fiscal deficit. In the second half of the current year, there has been a sharp contraction in government spending. For the next year, the fiscal deficit target is 4.8 per cent with a 16 per cent growth in expenditure. To meet this number, revenue needs to grow at about 20 per cent. This may be a challenge with the current moderate growth, and would need continued expenditure control. There is no major initiative which is not surprising given that it is a pre-election budget. However, the need to push capital expenditure is recognised with the investment allowance. The additional deduction of Rs. 1,00,000 for first time home loan buyers is quite meaningful. Other than that, the fact that there has not been too much of tinkering with tax rates is positive. Overall, however, it is not a positive or a negative budget and it is going to be more about execution and hoping that the government continues to work towards removing bottlenecks in the economy."

Nilesh Sathe, Director & CEO, LIC Nomura Mutual Fund
"As against the market expectations of announcement of a populist budget in the backdrop of general election next year, FM has announced a realistic, balanced and pragmatic budget. Fiscal deficit target of 4.8 per cent is possible in view of disinvestment target enhancement from Rs 30,000 crores of current fiscal to Rs 40,000 crores and reduction in subsidies. Emphasis on infrastructure funding is also laudable.

Surcharge of 10 per cent on super-rich is not going to affect large numbers but will add substantial amount to the exchequer. First time investors in Rajiv Gandhi Equity Scheme (RGESS) will have a tax relief for their investments for three years. It will certainly attract more investors in equity market and mutual funds."

Debasish Mallick, MD & CEO, IDBI Mutual Fund
"There are proposals for widening the Rajiv Gandhi Equity Savings scheme, streamlining inflow from QFIs and different classes of portfolio investors and permitting Pension Funds and Provident Funds to invest in debt schemes of Mutual Funds. Distribution reach is proposed to be enhanced by streamlining the KYC norms and allowing Mutual Fund distributors to become members of the Stock Exchange. These are welcome steps and could act as facilitator for mobilisation by Mutual Funds".

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