Private sector mutual funds have reported increases in excess of 30% in their collections for the quarter ended 30th June 1999, as compared with the corresponding period last year.

The Finance Bill for the fiscal year 2000 had given some incentives to the mutual fund industry:

• Dividend in the hands of the investor was to be tax free and the 10% dividend tax would not be levied on open ended schemes with an exposure of over 50% in equity
• The reduction of long term capital gains tax to 10%

These measures gave a boost to the mutual fund industry as is evident from the increased mop-ups for the period ending June 30th 1999.

The improved performance of the mutual funds has also contributed to the increased mop-ups. However, it is important to note that a large part of the mobilisations are directed towards debt funds. Portfolio managers are confident that soon the equity schemes will also witness large inflows.

The increased mobilisations signify that like in developed markets, the retail investors prefer an exposure to the capital markets through professionally managed mutual funds. This is a positive step in the process of the development of a more matured capital market.

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