Comments
Exchange-traded funds seem to have received a boost from the Finance Minister this Budget. From reducing the securities transaction tax (STT) on them to including them in the universe of eligible securities for pension plans, ETFs may start seeing some serious investment flows, said industry players.
“The reduction on the STT means that the round-trip cost for an equity-oriented ETF investor will now come down from 65 bps to 0.2 bps. This will allow efficient pricing of the ETF units on the exchange. Earlier, round-trip cost for an equity-oriented MF investor was 25 bps. The changes in STT essentially remove the disadvantage that the equity-oriented ETFs had over equity-oriented MFs,” said Rajnish Rastogi, Sr. Fund Manager & Co Head- Equities, Motilal Oswal Asset Management Company.
Exchange-traded funds, other than gold, manage Rs 1,692 crore as of end January 2013. This is just about 0.2 per cent of the total assets under management of the industry which stood at Rs 8.26 lakh crore.
Further, the inclusion of ETFs in the pension and provident funds’ investible universe would boost the corpus under ETF management.
Modifications to the Rajiv Gandhi Equity Savings Scheme, introduced in last year’s budget, have partly been in line with the industry expectations.
Change in definition
However, the industry was looking forward to a change in the definition of the term “first-time investor” to widen the ambit of potential investors. Fund house officials said modifying the definition to include those who have an inactive depository account would have helped increase the reach of the industry.
To further increase the reach of the mutual fund industry, it has been decided to allow mutual fund distributors to become members in the mutual fund segment of stock exchanges “so that they can leverage the stock exchange network to improve their reach and distribution,” said the Finance Minister in his speech.
While some players in the industry have welcomed the move, others see this as an insignificant move.
“The total number of distributors in the industry has gone down to about 30,000. We need to create feet on the ground rather than create more avenues for the few existing ones. Steps should have been taken to bring more distributors into the net,” said Nilesh Sathe, Director & CEO, LIC Nomura Mutual Fund.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.