Sensex crosses 38,000 mark; what does this mean for mutual fund investors?
The stock market is on fire after finance minister Nirmala Sitharaman, announced a reduction in corporate tax earlier today.
FM announced a fiscal stimulus of Rs 1.45 trillion (0.7 oer cent of GDP) in the form of corporate tax rate cut to 22 per cent from 30 per cent. The stock market immediately gave stamp of approval. The market bellwether - S&P BSE Sensex - gained around 2000 points, its biggest rally in a decade.
Obviously, equity investors, including equity mutual fund investors, are delighted. However, mutual fund advisors and financial planners have this to say.
“It is definitely positive news for equity mutual fund investors, but it will not make a big difference to your returns in the long term. We have seen much bigger rallies in percentage terms. However, this is important from a market sentiment perspective, says SR Srinivasan, Founder SriNivesh Advisors.
Other steps announced by the finance minister include a tax rate of 15 per cent for new manufacturing companies commencing post October, 2019, removal of surcharge on capital gains on sale of equity shares and unit repealed including derivatives and MAT rate reduced from 18.5 per cent to 15 per cent.
“The above measures will act as a catalyst for supporting the slowing investment rate, boost corporate earnings, improve aggregate demand as corporates pass on some of the benefits to consumers and attract FPI flows into India,” says Rajiv Singh, CEO, Karvy Stock Broking.
Puneet Oberoi, founder, Excellent Investment Advisors, believes that short-term ups and downs in the market shouldn’t make you change your investment strategies. “Markets going up and down is a part of your investment journey. When the markets go up, your schemes will make a little extra return. The market is cyclical and hence the correction that we have seen in a part of it. Investors need to focus on their long term goals and continue to invest,” says Puneet Oberoi.