Since Friday, mutual funds and their salesmen have been working hard, creating a 'buying panic'. Ignore them.
28-Mar-2023 •Dhirendra Kumar
Panic among investors is usually for selling and running away from the markets but since Friday last week (March 24th), Indian mutual funds and their salespeople are trying to create a 'buying' panic. This is in response to a new taxation rule that comes into effect on April 1, 2023. If you buy certain types of funds till March 31, the tax you pay for your gains will be lower. These funds are debt funds, gold funds, international funds and certain types of hybrid mutual funds.
Salespeople suggest that investors redeem other deposits and investments to invest in these funds. Some AMCs have re-opened large investments in international funds until March 31 to take advantage of the panic they are trying to spread. This is absurd - in fact, it is blatant mis-selling.
The reason is that unless you were about to invest in these funds anyway, these investments offer no great advantage. The tax you pay on these returns if you invest today is exactly the same as earlier. In the future (from April 1, 2023), the tax will be somewhat higher. If these funds were not suitable for you last week, they are not suitable now, nor will they be in the future.
Basically, these people are trying to make you invest in fund types without regard to suitability merely because, in the future, the tax on those funds will be higher. This is a nonsensical idea and a dishonest way to treat investors.
Such rank opportunism lowers investors' trust in mutual funds. Hopefully, Value Research members will resist this spurious buying panic being created.
The no-indexation rule and our recommended debt funds
Fund houses open up international funds ahead of tax changes