Growing apprehension for mutual funds:
Equity mutual funds have recorded a net outflow of Rs 2,725 crore in October. This is the fourth straight month that equity funds have recorded net outflow. On top of this, a whopping 40 lakh SIP accounts have been terminated by investors in the last six months.
The mutual funds have earned dismal returns over the last 3-5 years.
This underperformance has taken a shine away from the mutual fund industry to an extent. Top large-cap funds have delivered between 6-11% return for the last three years and 10-13% over 5 years. Most of them have under-performed the benchmark indices.
All in all, investors have started to look for safer / traditional low-cost alternatives like FDs and Gold. The popularity of low-cost (low expense-ratio) products, like index funds and ETFs, has also increased.
However, the situation is now improving on the ground with a bounce-back in the economy. Although mutual funds should get back to generating decent returns in the future, the time is ripe for products like index funds, ETFs and smallcases to grab a chunk of the savings pool in India.
GDP to return to pre-Covid levels by June 2021 - Morgan Stanley
Morgan Stanley expects India’s Gross domestic product (GDP) growth to return to pre-COVID levels by June next year. It expects that India’s GDP will contract by 5.7% in 2020 and rebound to 9.8% in 2021.
The global investment banker further believes that RBI is likely to push for growth and continue to provide monetary support. As a result, inflation is unlikely to moderate in the near term.
We believe that RBI is left with limited options to support growth as inflation has already reached above its target of 4% (+ or - 2%). Hence, there is a limited possibility of a further rate cut in the current cycle. In absence of RBI's support, the government will have to expand fiscal spending to support growth.
Good response to the ‘Vivad Se Vishwas’ scheme:
The government has generated Rs 72,480 crore so far through the direct tax dispute resolution scheme ‘Vivad Se Vishwas.’
A total of 45,855 declarations have been filed under the scheme, involving disputed tax demand of Rs 31,734 crore till November 17. Central public sector utilities (CPSUs) have also been an active participant and seen settling their disputed tax under the scheme.
A positive response to this scheme is a win-win situation for the government as well as the taxpayers. It has enabled the government to receive disputed taxes that were under various stages of court cases. Taxpayers, on the other hand, could settle the pending taxes at an amount lower than what was claimed earlier
