Mumbai: Mutual funds this year have some direct and indirect impact due to the overall performance and taxation. 2018 has been a year of struggle on the performance front, Dhirendra Kumar, chief executive officer of Valueresearchonline.com, a financial advisory platform.
Performance: The one-year returns were not as impressive, everything except technology funds returned in single digits, said Kumar. While mid-cap funds were down 9-10%, large and midcap funds were down around 5% and equity was down by almost 10%, he said. There were some nasty surprises in debt funds. “High end volatility characterizes 2018. It was a roller-coaster ride and a very tumultuous year because of the crude oil movements and liquidity tightening after the fallout of Infrastructure Leasing & Financial Services Ltd (IL&FS)," said Lakshmi Iyer, chief investment officer of fixed income and head of products at Kotak Asset Management Company Ltd. When it comes to direct plans, on an average liquid funds’ one-year returns were 7.3-7.4%, ultra-short term funds were just a shade below that, around 7.3% and short term funds returned around 6%, said Kumaresh Ramakrishnan, head of fixed income at DHFL Pramerica Asset Management Pvt. Ltd. While investing in equity mutual fund, you should always have a long-term horizon. “In case of debt mutual funds, retail investors should only look at liquid funds and ultra-short term funds," said Melvin Joseph, founder of Navi Mumbaibased Finvin Financial Planners.
Taxation burden: This year’s budget imposed a long term capital gains tax of 10% on the gains in excess of ₹ 1 lakh without indexation benefits. “The LTCG taxation brought about in the budget is the only thing that could be termed as negative from the investment perspective but that was expected to happen sooner or later, says Sharad Singh, founder of Invezta, an online mutual funds investment platform. However, if an investor has gained any long term capital gains till January 31, 2018, they will be grandfathered, meaning the investor doesn’t have to pay tax based on the new tax changes. For this reason, Suresh Sadagopan, a Mumbai-based financial planner, believed that the tax impact may be marginal until January 31.
According to Rahul Singh, chartered accountant, Taxmann, for redemptions claimed after February 1, 2018, the market value of the shares as on January 31, 2018 will be considered as the cost of acquisition (if it is higher than the original cost of acquisition on the purchase date).