Financialisation of savings received a fillip post-demonetisation and resulted in a sharp jump in inflows into mutual fund schemes. The chart shows how fund flows stepped up from FY17 onwards.
The mutual fund industry would be happy if the government rolls back the long term capital gains tax imposed on equity mutual funds that was introduced in the 2018-19 budget. This will be the main expectation that mutual funds from the Budget.
If the government decides to hike the limit that individuals can invest under Section 80C to avail tax benefits, mutual funds could benefit to the extent inflows into Equity Linked Saving Schemes increase.
At a broader level, a budget that gives confidence in India’s fiscal position and economic growth will boost investor confidence and markets, all of which will benefit mutual fund investors.