Did The Interim Budget 2019 Live Up To Expectation Of The Mutual Fund Industry?
Feb 05, 2019

Author: PersonalFN Content & Research Team

(Image source: thebluediamondgallery.com)

Budget 2019 seems to have left mutual funds high and dry. The finance minister hasn't met even a single prominent demand of the industry.

What were the demands of the mutual fund industry?

  • Introduction of Debt Linked Savings Schemes (DLSS) on the lines of Equity Linked Savings Scheme (ELSS)

  • Mutual Funds as a Specified Asset having a lock-in period of three years under section 54EE

  • Equity FoFs (Fund of Funds) should be classified as equity funds

  • Mutual funds shall be treated at par with ULIPs (Unit-Linked Insurance Plans)

    At par treatment to debt funds

[ReadHere's What The Indian Mutual Fund Industry Expects From Interim Budget 2019]

Government's strategy of avoiding a pro-rich stance in the Budget 2019 to keep its opponents mum has resulted in no real action for mutual funds. Some fund houses have been vocal about their disappointment while the most others have held a neutral stance.

They have chosen to comment specifically on the Budget 2019 announcements without touching upon the expectations of the industry.

If you remember, just before the budget, industry body the AMFI (Association of Mutual Funds in India) had made a representation to the government putting forward their demands in the form of suggestions.

Surprisingly, despite government not nodding to any of the prominent demands of the industry, AMFI's CEO Mr NS Venkatesh has been upbeat on Budget 2019.

Budget is pro-growth blended with fiscal prudence. Some of the steps like Pradhan Mantri Kissan Samman Nidhi, the new initiative aimed to take care of the distressed farmers, the pension scheme for the unorganised sector workers and the raising of the income tax exemption limits are very progressive and most welcome. 

Mutual Funds sector would benefit from the additional cash in the hands of the farmers and the increased savings for the salaried class. The other welcome step is the increase in the TDS limit on deposits which would ease the hardships faced by the depositors. 

Some more industry voices

There is no direct impact on mutual funds since no material tax benefit or anything for equity linked schemes was given in the budget. Theoretically, there should be an impetus to infrastructure because there were direct sops on this front. But we have to wait and watch how this plays out in the market because there is no road map for these proposals as of now-Jimmy Patel, MD and CEO of Quantum Mutual Fund.

"The expenses are high, but the revenue is not picking up and that is a challenge. My expectation is that the GST collections will pick up in the coming year. But I believe that with the RBI's help and more clarity over the time, the concerns will be sorted out- Mahendra Jajoo, Head-fixed income at Mirae Asset Mutual Fund.

I think it is not a euphoric budget but it is not negative. Market is still trying to understand the breakup of the money allotted. We are still waiting to read the fine print. Disinvestment target has been put at Rs 90,000 crores. It is looking like a far cry given the last year and year before that also-Lakshmi Iyer, Chief Investment Officer of debt and head of products, Kotak Mutual Fund

Here's why the mutual fund industry might not be complaining...

As you know, the Budget 2019 has been the pro-farmer and pro-middle-class budget.

Usually, pro-farmer steps stimulate the rural economy and thus result in higher rural consumption. Similarly, middle-class friendly announcements help boost the urban consumption and encourage household savings too.

These factors bode well for mutual fund houses.


There hasn't been any specific announcement for the mutual fund industry. However, the income tax rebate proposed for assessees having net taxable income of Rs 5 lakh, would place more money in the hands of over 3 crore tax payers. Moreover, if pro-agriculture and pro-middle-class announcements translate into higher earnings for listed companies, the stock markets might witness a rally. This might result in higher participation.

What investors should do?

If you are a beneficiary of the higher tax rebate announced in the Budget 2019, carefully spend the additional money that you will have from tax savings. Moreover, you should also try to increase your savings and up your investment commitments. Higher savings and prudent investments might help you achieve your financial goals ahead of your schedule. Would you mind retiring at 55 instead of 60 if your finances permit?

Perhaps, it's a time to increase your Systematic Investment Plan (SIP) commitments. While you do so, ensure that you are investing in direct plans.

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​Happy Investing!

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