Data from the Association of Mutual Funds in India (AMFI) showed that investor flow shifted to long-term debt funds in March as market participants sought to take advantage of long-term capital gains tax benefits, which was Rs. Expired in April.
Long duration and gilt funds attracted net inflows 4,674 crore and 4,430 crore, while corporate bond funds saw net inflows 15,626 crores. Inflows were also seen in dynamic bond funds and banking and PSU funds. 5,660 crore and INR 6,496 crore respectively.
Debt fund investments made till April 1 will continue to get the benefit of long term capital gains tax. This means that long-term capital gains (investments held for more than three years) will be taxed at 20% with indexation benefit. The gains on investments made after April 1 will be taxed in the tax slab of the investor.
Meanwhile, short term schemes saw net outflow, while liquid schemes saw net outflow 56,924 crores.
Withdrawals from liquid funds are expected at the end of the financial year as companies need to pay advance tax.
“Mutual funds saw significant AUM (assets under management) churn in March on the back of changes in tax laws. While the cash category saw an outflow of ~ 65,000 crore, which is usually a year-end event, arbitrage funds and funds with maturity of less than 1 year saw an outflow of ~ 12,000 crores and ~ 28,000 crore, respectively,” said Ajaykumar Gupta, chief business officer, Trust Mutual Fund.
“A major portion of the above outflows went back into duration funds such as corporate bonds, banking and PSU funds, dynamic bonds, long duration and gilt funds, which saw total inflows of ~ 39,000 crores. with an influx of 27,000 crore, Targeted Maturity Fund/Index Fund was the biggest beneficiary as investors redistributed money into long-term funds to get indexation benefits,” he said.
Mutual funds also launched several target maturity funds in March so that investors can avail long-term capital gains tax benefits before April 1.
On the other hand equity schemes saw net inflows 20,534 crore in March. This was the highest in 12 months.
March flows were up 30% compared to the previous month.
Monthly contributions from Systematic Investment Plans (SIPs) have grown steadily month-on-month. it stood on 14,276 crore, which is the highest ever.
“India and its growing investor base continue to believe in equity markets through the mutual fund route. Equity-oriented mutual funds registered net inflows of more 2 lakh crore in FY2022-23,” said NS Venkatesh, chief executive officer of Amfi.
catch all business News, market news, today’s fresh news events and Breaking News Update on Live Mint. download mint news app To get daily market updates.