It was a week of dividend declaration. Many funds declared their scheduled regular dividends while most others rushed to pay dividends now, in light of the current Budget announcements. And the regular dividend amounts declared by the funds were substantially higher than the previous payouts. For instance, Grindlays Super Saver Income Fund has paid its highest dividend, 7.5% in its quarterly plan and 9.85% half-yearly plan. Likewise, Birla Gilt Plus declared a 4.54 percent in its Liquid plan and 7.26 percent in its Investment Plan, Pru ICICI Income Plan gave 8%. Kotak Mutual declared dividend in its dozen bond funds.
Currently dividends from mutual funds are tax free in the hands of the investors. But from April 1, 2002, dividends received from debt funds will be taxed at the marginal rates of taxation applicable to the investors while those from equity funds at a flat rate of 10 percent. It is perhaps the last opportunity for the dividend plans of funds to distribute heavy dividends for their investor's benefit. And by paying dividend now, investors will be charged the lowest possible tax on their gains. That is why the rush to give dividends now.
To beat the deadline, many equity and balanced funds also declared dividend -- Escorts Balanced (10%), Canbank's Cancigo (9%), Canpremium (7.5%), Cangilt PGS (2%), Pru ICICI Growth Plan (8%).
Few vanilla funds were also launched. LIC Mutual Fund extended its bond fund offerings with the launch of a Liquid Fund. And to make most from the available opportunity of tax-free dividends till March 31, 2002, IL&FS Mutual Fund has introduced an Annual Dividend Plan in its Bond Fund. StanChart Mutual launched the 5th Series of the Grindlays Fixed Saving Scheme.
But for surprise lavish dividends for fund investors, it was another usual week. The equity and balanced funds lost, while most bond funds gained. The average equity fund lost 0.24 percent against the market loss of 1 percent on the Sensex. But many funds gained. The key gainers were – Zurich India Capital Builder (2.46%), Libra Taxshield '96 (1.97%), Alliance Buy India (1.77), Birla IT (1.68) and Magnum Pharma (1.65).
Medium-term bond funds gained 0.44 percent. The key gainers were ING Income Portfolio (0.79%), JM Income-G (0.70%) and Alliance Monthly Income Debt (0.68%). The long and medium term gilt funds gained more -- 0.93 percent. The big gainers were -- IL&FS Gilt Fund Long-term (1.48%) and Tata GSF-D (1.44%).