Meghalaya accounted for 9% of the total AAUM at ₹3,623 crore in March 2024, clocking a 111% growth of over ₹1,714 crore in March 2020. Image for representation purposes only. File
| Photo Credit: Getty Images

GUWAHATI

The average net assets under management (AAUM) of the northeastern States has grown by nearly 145% from the 2020 level, an analysis of investments in mutual funds (MF) has revealed.

MF investments rose from ₹16,446 crore in March 2020 to ₹40,324 crore in March 2024, indicating a growing appetite among investors from smaller towns and cities, the study by ICRA Analytics said.

The share of the northeastern States increased to 0.73% of the total AAUM of the MF industry, which stood at ₹55.01 lakh crore in March 2024, up from around 0.67% in March 2020, when the industry’s AAUM stood at ₹24.71 lakh crore.

“Although the contribution of the northeastern region to the total AAUM of the industry is still small in percentage terms, there has been a steady and consistent growth in MF inflows in these States backed by increasing awareness among people and the growing interest among retail investors for investing in equities through the MF route,” ICRA Analytics’ senior vice president and head of market data, Ashwini Kumar, said on Monday.

With an AAUM of ₹29,268 crore, Assam was the leading contributor in the northeast, accounting for nearly 73% of the total investment in March 2024. The AAUM of Assam grew by almost 159% in the last five years, up from ₹11,298 crore in March 2020.

Meghalaya accounted for 9% of the total AAUM at ₹3,623 crore in March 2024, clocking a 111% growth of over ₹1,714 crore in March 2020.

The other States in the order of investment size are Tripura with 5% at ₹2,174 crore (₹1,155 crore in March 2020), Nagaland with 4% at ₹1,668 crore (₹965 crore in March 2020); Arunachal Pradesh with 3.8% at ₹1,532 crore (₹525 crore in March 2020), Manipur with 2.9% at ₹1,152 crore (₹403 crore in March 2020), and Mizoram with 2.25% at ₹907 crore (₹386 crore in March 2020), the data said.

“There has been a steady increase in awareness about the various investment options among people, primarily from smaller towns and cities. This, coupled with growing financial literacy and the surge in interest among retail investors for investing in equities through the MF route, all contribute to good growth in AAUM in towns and cities beyond the top 30,” Mr. Kumar said.

Investor awareness campaigns conducted by asset management companies in the region have also helped build awareness among people, he added.

“However, the MF penetration continues to be low in the country and there is a lot of scope for growth. The burgeoning middle class and rising financial literacy will likely prompt more and more people to resort to financial planning to accrue savings. This is expected to shore up mutual fund investments in the northeastern States moving forward,” Mr. Kumar said.

Growth in net AUM

The Indian MF industry grew steadily in inflows across debt and equity-oriented schemes in April 2024. The net AUM (assets under management) of the industry, which registered a 35% growth in 2023-24, grew by nearly 38% on a year-on-year basis to touch ₹57.26 lakh crore in April 2024, as compared with ₹41.62 lakh crore in April 2023.

The net AUM grew sequentially by 7% compared with ₹53.40 lakh crore in March 2024. Net inflows surged by 97% at ₹2.39 lakh crore, as against ₹1.21 lakh crore in April 2023.

Net inflows into debt-oriented schemes under the open-ended category grew by 78% at ₹1.90 lakh crore in April 2024, up from ₹1.07 lakh crore in 2023. “The Reserve Bank of India’s stance to maintain the status quo on policy rates for the next one or two quarters is likely to lead to some softness in yields in the near term. However, investors are likely to be a little watchful of the developments around election months and will keep a close watch on the global interest rates,” Mr. Kumar said.

Inflows into equity-oriented schemes increased by 192% at ₹18,917 crore (₹6,480 crore). Sectoral or thematic funds registered a 741% growth in inflows at ₹5,166 crore in April 2024, as against ₹614 crore in April 2023.

“The small-cap funds, which witnessed some correction on the back of the recent SEBI mandate requiring routine stress tests to be conducted and had registered net outflows to the tune of ₹94 crore in March 2024, registered net inflows of around ₹2,209 crore in April 2024,” Mr. Kumar said.

“We are of the view that the small and mid-cap funds will continue to hold investor interest in the medium to long term backed by the value created in the entities supported by robust regulatory framework leading to better corporate governance practices, and the government’s firm intent to push for an intrinsic growth in the country’s economy,” he said.

New Delhi:

Markets regulator SEBI on Wednesday extended the deadline for mutual fund account holders till January 1, to nominate a beneficiary or opt out of it by submitting a declaration form, failing which their folios will be frozen.

Earlier, the deadline for existing mutual fund holders to provide a choice of nomination was on or before September 30. 

The move is aimed at helping investors secure their assets and pass them on to their legal heirs.

“Based on representations received from the market participants, it has been decided that the provision… about the freezing of folios, shall come into force with effect from January 1, 2024, instead of September 30, 2023,” SEBI said in a circular.

Further, SEBI asked asset management companies (AMCs) and RTAs to encourage the unit holder to fulfill the requirement for nomination/ opting out of the nomination by sending a communication on a fortnightly basis by way of emails and SMS to all such unit holders who are not in compliance with the requirement of nomination.

The Securities and Exchange Board of India (SEBI), in its circular on June 15, 2022, made it mandatory for mutual fund subscribers to submit the nomination details or declaration to opt out of the nomination on or after August 1, 2022.

The deadline was extended several times.

Market experts are of the view that many mutual fund folios in the past have been opened without nominating anyone to whom the assets should be transmitted in case something happens to the account holders.

This means that the rightful heirs had difficulty in getting the assets transmitted to them due to the hassles of different kinds of documentation requirements.

On Tuesday, the regulator extended the deadline by three months to December-end for existing demat account holders to provide a choice of nomination or formally opt out of nomination through a declaration form.

Additionally, the submission of ‘choice of nomination’ for trading accounts has been made voluntary by SEBI as a move towards ease of doing business. 

Union Finance Minister Nirmala Sitharaman speaks in the Lok Sabha during Budget Session of Parliament, in New Delhi on March 24, 2023.
| Photo Credit: PTI

The Finance Bill 2023 was been passed in Lok Sabha without a discussion and the House was adjourned to meet again on March 27.

Moving amendments to the Finance Bill, Nirmala Sitharaman said, “It has been represented that payments for foreign tours through credit cards are not being captured under the Liberalised Remittance Scheme (LRS) & they escape tax collection at source. The Reserve Bank of India is being requested to look into this with a view to bring credit card payments for foreign tours within the ambit of LRS and tax collection at source thereon.”

Withholding tax on royalties and technical services fee may increase cost of technology import

The withholding tax rate on royalties and fee for technical services paid to non-residents has been raised from 10% to 20%. “This may increase the cost of import of technology in cases where Indian companies are grossing up withholding taxes and any bilateral tax treaty benefits are not available,” said Gouri Puri, partner at Shardul Amarchand Mangaldas & Co.

GST Appellate Tribunals to be set up across country

The Finance Bill has paved the way for setting up GST Appellate Tribunals across the country, with a principal bench in New Delhi and several State benches. The Tribunal will be headed by a former Supreme Court judge or a retired Chief Justice of a High Court. 

Also read: GST appellate tribunal may be headed by a former Supreme Court judge

The measure will have the intended effect of curbing excessive F&O trades only in flat or range-bound markets as when markets are volatile, traders will hope to offset the higher tax by higher payoffs, Mr. Jasani explained. “In the past, such raising of taxes had a temporary minimal impact of F&O volumes. For more effective curbs on volumes, SEBI or stock exchanges may have to link the volumes and Open interest in the futures and options market with the disclosed income or wealth of the participants,” the HDFC Securities official said.

Increase in STT to discourgae excessive trade in F&O

“While the proposed increase in STT will shore up revenues of the Govt to a certain extent, the main idea behind this could be to discourage the excessive trade in F&O segment where a large number of retail traders end up losing money as per a recent SEBI study,” Deepak Jasani, head of retail research at HDFC Securities told The Hindu. “An incidental effect of this could be shifting the F&O trades to SGX, Gift and other locations that do not attract such taxes for participants who have access to them,” he added.

Govt. tweaks Budget proposal to tax distribution from business trusts as income from other sources

In a move that will assuage unit holders of REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts), the government has tweaked the Budget proposal to tax distribution from business trust as income from other sources . “This is now proposed to be treated as return of capital by reducing the cost of acquisition of the units, as far as the issue price of the units. Any amount received in excess of the issue price would be taxable as income,” the Ministry explained.

Stakeholders concern on Angel Tax provisions to be addressed for startup investments

While there have been no changes made to the Budget’s Angel Tax provisions for investments in startups, the Finance Ministry has said all concerns raised by stakeholders in implementation of this proposal would be addressed. “The draft rules related to valuation shall be shared with the stakeholders for their inputs in April itself, and exclusions, currently provided to domestic Venture Capital Funds etc, shall also be considered for similar overseas entities,” the Ministry assured.

This will impact all mutual funds that offer schemes with nomenclatures such as conservative hybrid funds, that invest predominantly in debt but have an equity exposure of up to 35% in their portfolios.

“An arbitrage is being created right now where interest income from debt mutual fund (where not more than 35% invested in shares in domestic company) is not distributed and converted into long term capital gains of 20% (with indexation). In some case it comes to even less than 10% due to indexation. Thus many taxpayers are able to reduce their tax liability through this arbitrage,” the Finance Ministry explained

Tax on debt mutual funds

Income from debt mutual funds that invest up to 35% in equity shares of domestic companies will be taxable at applicable rate since income from equities in such funds do not constitute interest income.

Also read: Government scraps long-term tax benefit for debt mutual funds investing less than 35% assets in equity

Securities Transaction Tax raised on F&O contracts from April 1

The Government is raising the Securities Transaction Tax (STT) on futures and options contracts in the stock market from April 1, 2023, and changes to this effect were brought into the Finance Bill cleared by the Lok Sabha today. Options contracts will now attract 0.021% STT from 0.017% earlier and futures will attract a levy of 0.0125%, up from 0.01%