Individuals' share in asset value of MFs down 5 pcBy

The share of individuals in the total net asset value of all mutual funds declined to 37 per cent at end-March 2008 from 42 per cent in the previous year, while that of corporates, institutions and others rose to 57 per cent from 50 per cent for the same period, according to the annual report on the trends and progress of banking in India, 2007-08. Explaining the significant change, Prasunjit Mukherjee, a Kolkata-based mutual fund analyst, said, Fixed maturity plans (FMPs) as a category came in the fund industry some time in January 2008. They have a double indexation facility and the entire corporate base invested in FMPs of relatively longer duration. Individual investors invest mostly in equity-oriented funds and some portion in debt funds. Funds mobilised by mutual funds net of redemptions during 2007-08 rose sharply by 63.6 per cent to Rs 1,53,801 crore and the net assets under management of the mutual fund industry increased by 54.8 per cent during 2007-08. This significant increase in net mobilisation of resources by mutual funds was partly due to tax arbitrage. The interest from bank deposits is taxed at the marginal rate of taxation. The equity oriented mutual fund schemes are exempt from long-term capital gains, while short-term capital gains are taxed at 15 per cent. Dividend distribution from the money market and liquid funds is subject to 25 per cent tax plus surcharge and for schemes other than money market and liquid schemes; dividend distribution tax is 12.5 per cent plus surcharge. In the wake of the tight liquidity conditions since June 2008, mutual funds have faced redemption pressures. Mutual fund schemes also witness large outflows during advance tax payments. Fund facts • Share of individuals dropped to 37% at end-March 2008 while that of corporates, institutions and others rose to 57 per cent from 50 per cent • Individual investors invest mostly in equity-oriented funds and some portion in debt funds • Funds mobilised by mutual funds net of redemptions during 2007-08 rose sharply by 63.6 per cent to Rs 1,53,801 crore • The net assets under management of the mutual fund industry increased by 54.8 per cent during 2007-08