Budget 2012: Mutual fund industry's wishlist ‎(Moneycontrol - Java Training Courses)

Long terms capital inflows, and incentives to investors to keep funds locked-in for an extended period of time are the two areas crucial to the mutual fund industry's survival. And that's what players want the Finance Minister to focus on as he prepares Budget 2012.

The industry's biggest complaint is that nothing has been done in the past ten years to bring investors into the sector, while threats continue to escalate.

Java Training Courses

Dhirendra Kumar, CEO of Value Research says, "Methodically, everything that use to attract long-term money into MFs has been demolished. Finally, if DTC comes in force, even the ELSS will be out of its ambit, this was the last thing that helped the industry get the three year money."

Experts feel that the best way to ensure long-term capital inflows is to overhaul the system. Opening up fund flow channels like allowing provident funds to invest in the markets through mutual funds is one option the industry is hoping the FM will explore.

Sandesh Kirkire, CEO of Kotak Mutual Fund says, "The fact that you want to reduce dependence on FIIs because today one third of floating stocks are held by FIIs. What we need is a flow of long-term capital through retail Indians into equity markets. This can happen in two ways, PF money should move into equities, either through mutual funds or active managed mutual funds or through passive index funds."

Java Training Courses

Greater depth is also essential to the industry... and it wants to come up with products that will offer higher tax benefits to investors in return for longer lock-in periods.

Kirkire SAYS, "We should also allow investors to put mutual fund money in mutual funds, right upto retirement, so that they don't take out money when they invest. Automatically, the money will move into capital markets, the real long-term money will come into mutual funds. Today, when you look at MFs average holding period is three-four years. It is perhaps important to make it 10-20 year kind of long term money."

The other concern is that taxes are duplicated. for instance, securities transaction tax is paid twice -- once by the investor when exiting a fund, and once by the fund manager while buying or selling stocks. Experts feel these are an added burden on the investor, and should go.

Issues of double taxation, and lower capital inflows aside, mutual fund houses also hope the FM will give pension plans a bigger push to the pension schemes like bringing MF pension schemes on par with the national pension scheme. They say this move will bring more money into the system, giving relief from one major concern.

Java Training Courses