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Tax sops perk up equity MF NAVs

On the other end of the spectrum were funds focused on the IT sector.

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Last Updated: Sep 25, 2019, 09.22 AM IST|Original: Sep 25, 2019, 09.22 AM IST
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(This story originally appeared in on Sep 25, 2019)
Mumbai: The two-day rally from Friday that added nearly 3,000 points (8.3 per cent) to the sensex has also made mutual fund (MF) investors rich. Between Friday and Monday, the net asset values (NAVs) of a large number of MF schemes witnessed double-digit percentage gains, with banking and financial services funds gaining the most, data from Value Research showed.

According to analysts, most private banks will gain the most from the government’s decision to cut taxes on corporates by 10 percentage points. Along with the lenders, companies from the consumption and infrastructure sectors will also benefit more than those in other sectors.

As a result, MF schemes that invest all or most of their funds in banking and financial services gained the maximum. While all the exchangetraded funds (ETFs) tracking banking indices gained more than 14 per cent in just two days, funds investing in PSU banks rose a little over 9 per cent, data showed. Likewise, funds focused on the banking, financial services and insurance (BFSI) sector increased by between 10.5 per cent and 13.5 per cent, while infrastructure-focused funds gained in the 6.4-11.2 per cent range.

On the other end of the spectrum were funds focused on the IT sector.

Analysts said that since most of the software exporters are operating out of special economic zones that enjoy tax incentives, IT companies would not gain much from the government’s fiscal incentives. As a result, IT-focused funds lost between 0.7 per cent and 3.7 per cent during the two days.

Another interesting part was the sharp rise seen in their total investments by investors who invested through the systematic investment plan (SIP) route. According to Vijay Mantri, chief investment strategist & co-promoter at financial advisory firm JRL Money, due to the rupee-cost averaging process in SIP, those who invest through this route have been able to spread their losses over the last one and a half years, since the time the market — outside of the two benchmark indices — has been showing weakness.

“That’s because while the losses have been spread over several months, the gains have been bunched up and came in just two days,” Mantri said. “That’s why financial advisers say that for investors with a regular income stream, SIP is the best route to invest money for the long run.”

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