A slew of measures ranging from tax sops to ease of doing business to boost the sagging fortunes of the Indian economy announced by the finance minister Nirmala Sitharaman this evening might help to brighten the lives of mutual fund investors in the coming days. The stock market has been going through a rough phase lately due to the widespread pessimism in the economy and in the absence of any economic package in the last budget.

Most equity mutual funds have been hit hard by the depressed sentiment in the last few months. Most of them have been offering negative returns in the last one year. For example, the large cap mutual fund category has been offering -7.58 per cent returns in the last one year. Mid cap and small cap mutual funds were the worst hit, with both categories offering double-digit negative returns in the last one year.

The finance minister announced the scrapping of enhanced surcharge on short-term and long-term capital gains tax. “In other words, the enhanced surcharge on FPI goes,” said Sitharaman. The enhanced surcharge on FPI has severely impaired the market sentiment. Many FPIs, especially pension funds and sovereign funds, that were listed as trusts were hit by the new surcharge announced in the budget, and many of them have started selling heavily soon after that.

With the scrapping of the enhanced surcharge, the government has finally addressed concerns of the stock market. The move will definitely help to improve the sentiment in the short term. However, the revival of fortunes of the market entirely depends on the efficacy of the other measures announced by the finance minister to revive the slumbering Indian economy.

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One thing is sure: the gloomy scenario would see some improvement in the immediate term. So, what should mutual fund investors do? Simply put, carry on with your investment plans and do not be greatly influenced by the ups and downs or depressed or improved sentiment in the stock market.

Since the finance minister promised to come back with more measures frequently, you might have more actions in the coming days.

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FM announces withdrawal of enhanced surcharge on FPIs, domestic investors



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