Investment into mutual funds continued growing at a strong pace this year, with January seeing net inflows of ₹53,817 crore. This is five times the corresponding figure for December at ₹10,923 crore. For the financial year to date, inflows now stand at ₹3.67 lakh crore.

This is double the inflow for the same period in January 2016 of ₹1.84 lakh crore.

Assets under management of the mutual fund industry crossed another landmark, touching ₹17.37 lakh crore at the end of January.

Optimum use of income funds

Income funds, which invest primarily in debt, have been reporting high inflows continually as investors lock down before interest rates fall further. Income funds as a category saw inflows of ₹28,588 crore, reversing the trend in December which saw net outflow of ₹33,182 crore. Equity funds suffered as a result, with net inflows falling to ₹3,714 crore in January, against ₹9,196 crore in December. Inflows into balanced funds remained flat, by and large, between the two months, at ₹3,304 crore in January. The ETF category saw a spurt in net inflow at ₹6,748 crore in January, against ₹4,349 crore in December.

Last month, the government completed a further fund offer of the CPSE ETF to divest ₹6,000 crore worth of shares in several public sector companies. The ETF is being managed by Reliance Mutual Fund.

Indexation benefit

Despite several demands from the mutual fund industry on easing tax rules for investors and allowing the industry to offer pension products, Budget 2017-18 didn’t offer much to the players or investors. However, Finance Minister Arun Jaitley’s proposal to change the base year used for calculating indexation benefit from 1981 to 2001, investors in debt mutual funds may stand to benefit, some experts say. Such funds qualify for long-term capital gains tax of 20 per cent with indexation benefit if held for more than three years. With the base year change, the tax liability is likely to fall.

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