The splendid recovery in the markets in the last two days following the drastic fall on Budget eve has brought some comfort for retail investors. However, uncertainty still lingers, with global markets still teetering and the government’s ability to achieve the revenue target being a matter of debate. Sunil Subramaniam, CEO, Sundaram Mutual Fund, spoke to BusinessLine on the Budget and the way ahead. Excerpts:
How do you see the Budget?
The Budget has given a lot of clarity. It has shown that the government has no political ego. They have continued with some of the UPA government’s decisions, be it MGNREGA or Aadhaar card. They knew that the world scenario is not conducive for growth. It is not the time to borrow more and make India a risky country. It gives great comfort to foreign investors that this government is continuing with the fiscal discipline commitment given by Chidambaram (former Finance Minister) in FRBM (Fiscal Responsibility and Budget Management).
The certainty of policy will help the industry take a long-term view on investments and look at sectors that will benefit from the Budget proposals. If there is an uncertain environment we also have to be more short-term in our approach. Exempting distributors earning less than ₹10 lakh a year from service tax is good. It is a huge saving of 14 per cent for distributors. They have exempted capital gains on merger of two options within a scheme. It will give a boost to merger of common options within schemes and lead to consolidation.
Why have SIP investors not gained from the market fall?
Yes. This kind of sharp fall after the Budget was unexpected. I do not think anybody has caught the bottom of the market. On the other hand, SIP investors would have got good value for their money in the volatile market in the first two months of this year. So, SIP investors should not be worried about daily movement of the market. It should be more of a wealth creation for future planning.
Have mutual funds adopted the cap on upfront commission?
Yes. There is exemption for the tax-saver scheme and SIPs. It has worked well. For the tax-saver scheme, we can give 3 per cent upfront commission, because the money is locked in for three years. Similarly, in SIP for three years, one can front-end the commission.
What is proving difficult is to get new customers. With a commission of 1 per cent, a distributor will earn ₹100 a year if he gets a customer to invest ₹10,000.
Has the adoption of e-commerce by mutual funds been slow?
I think SEBI is working on it. They want to create a separate option for e-commerce people to mobilise money, which will be placed in between direct and distributor option. They want to introduce e-commerce with a much lower expense ratio. The mutual fund industry has set up ‘MF Utility’ which is a common electronic platform wherein one can invest in any MF using one platform.
Your view on EPF getting taxed…
The government has already said that they will clarify on their stand. On the face of it, it does not look like a just system. However, I think the intention of the government is right. They wanted to equalise the benefits of NPS and EPF. It also wants people to use their retirement benefit for a sustainable income after retirement.