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How Mutual Funds Fared During Modi's Rule in Last Five Years?

Jagrity SharmaJagrity Sharma24 June 2019

With the rise of Sensex in the last 5 years, how has the mutual fund investment grown in the last 5 years during the Modi Government rule? Let’s find out!

Mutual Funds in India

Over the past 5 years of the Modi Government, the mutual fund market has witnessed some difficulties. Let us take an overview of whether you have tapped the Modi Government’s nerve and have invested in best mutual funds to witness maximum gain during Modi’s reign. The past reign of the Modi Government took some hard decisions resulting in a good GDP performance. But on the other hand, the capital market showed extreme volatility. Therefore, to understand the performance of the mutual funds and how did they cope with extreme market volatility, it is very important that we will study and analyze the performance of the capital market and mutual funds during Narendra Modi’s last reign of 5 years as Prime Minister. In addition, the performance of your mutual fund scheme in such market conditions is a perfect benchmark to judge whether the mutual funds fared well during the Modi Government rule in the last five years.

The manner in which the mutual funds fared during Modi’s rule will state whether the Government has been successful in offering a conducive environment to investors for creating and multiplying their wealth through capital market space. Similarly, the study of the performance of your mutual fund scheme over the last 5 years shall be helpful to check whether your investment decisions were in harmony with the Modi Governments’ governance.

Before the Modi Government, most of the leading fund houses and mutual fund managers advised investors to channelize their savings in small-cap and mid-cap companies. Therefore, here is some interesting data related to the mutual fund during Modi’s rule in the last 5 years:

  • Investment in Small-cap companies topped the mutual fund space as it offered 20.87% CAGR returns
  • Investment in Mid-cap companies ranked 2nd in the mutual fund space as it offered 18.45% CAGR returns
  • Investment in Multi-cap companies followed suit at the 3rd place by offering 15.73% CAGR returns
  • Large-cap funds garnered 13.61% returns, while
  • ELSS generated 12.74% returns

(* Kindly note the above data has been referred from ETmutualfunds)

Thus, from the above data, we can deduce that you invested inbest mutual fundsif your investment pattern was as per the above given pattern. Apart from the above data, there are some other interesting facts as under:

  • After the Modi Government came in rule during 2014, the mutual fund space, for the first time ever, crossed the mark of Rs. 10 lakh crore AUM
  • During 2017, the mutual fund space saw a ground-breaking investment of Rs. 20 lakh crore AUM
  • We see a double-fold increase in the mutual fund space after the Modi Government announced ‘demonetization’ where most of the investors moved their money from banking channel to mutual fund space.

Thus, above is the aftermath of the performance of the mutual fund during Narendra Modi’s rule in the last five year. Now, after the second glorious victory and NaMo’s 2nd term as Prime Minister, there is a lot of expectation of mutual fund managers from the Modi 2.0 Government.

Expectations in NaMo 2.0 Government Rule

Following are some of the most awaited expectations set out by the mutual fund industry for its new Government in order to make investing in mutual fund more lucrative:

Removal of Long-Term Capital gain Tax

Modi Government in its financial budget of 2018 introduced long-term capital gain tax @ 10 percent on the earnings from equities amounting to more than Rs. 1 lakh per financial year. Most of the fund managers expect that the NaMo 2.0 Government would take back this decision as it will promote mutual funds and attract more investors.

Fund of funds scheme to be donned as equity scheme

In the current scenario, the fund-of-funds scheme is considered as a debt mutual fund scheme, even though most of the investors’ money is invested in equity instruments. Many asset management companies are demanding to change the status of the fund-of-funds scheme to be at par with an equity mutual fund scheme as it predominantly invests in equity instruments. In terms of taxation, they expect that the Modi Government treats the fund-of-funds scheme as an equity fund.

Tax benefit to pension fund schemes offered by mutual fund houses

Mutual fund companies offer pension fund schemes to its investors, but the scheme does not enjoy tax benefit like any other pension scheme. Mutual fund managers expect that the Modi Government extend the tax advantage to the pension schemes offered by mutual fund companies as it will attract the attention of investors and increase the popularity of the pension scheme. Thus, apart from managing the pension funds, the mutual fund companies must be permitted to offer tax benefits for their pension fund schemes.

Strengthen the debt fund portfolio

Due to the recent crisis in the NBFC sector, the debt fund schemes offered by mutual fund agencies faced a huge fallback. The investors’ money in the debt fund portfolio faced a huge fall in NAV, thereby downsizing the confidence of debt fund investors. The mutual fund managers feel that the Modi Government should work towards strengthening the debt space and restore the faith of investors by implementing stricter norms for protecting the interest of the debt fund investors.

Scheme portability

Fund managers expect that a smooth process to be introduced by the Government for porting from existing Asset Management Company to another within the same fund scheme. This would be free of cost and without any tax implication.

Strong Economy

The Government intends to offer a conducive environment by creating a strong economy and instilling financial discipline within investors. This would also control the factors affecting the fiscal deficit.

Thus, the fund managers are optimistic that the mutual fund space will witness a groundbreaking investment rate, if the Modi 2.0 rule overtakes and fulfills the above stated expectation. By fulfilling these expectations, the fund managers feel that it will help to attract new investors to the mutual fund space and simultaneously restore the faith of the existing mutual fund investors.

Finally, all the fund managers suggest investors not to exit the capital market soon as they feel optimistic about the new term of Modi’s rule. This is because the last five years of Modi’s rule the mutual fund space coped positively to the volatility of the capital market and demonetization. So, if you had invested in the equity market in the last 5 years, you would have made some profit as the Sensex moved from the 25,000 mark to the current 39,000 mark during the Modi Government reign.

Recommended Read:All about Duration Mutual Funds?

Jagrity Sharma
Written by Jagrity Sharma
A bibliophile who hates alliterations, but loves cream, comics and content immensely! On another note, a content marketer who leverages the power of words to explain...almost anything!