Apr 2023

Market overview of last month?

The Nifty 50 index touched the month's high at 17,799 and the month's low at 16,828 (last month was 18,134 and 17,255 respectively). The markets showed a marked downward trend without much indication of an upswing. CNBC TV 18 reported that nearly 400 stocks are currently hovering near their 52-week highs or lows, with only 11 close to their 52-week highs and the rest near their 52-week lows. This situation can be attributed to concerns regarding the banking sector's instability and the potential recession risks in the US, due to high inflation. To combat the stubborn inflation, the US Federal Reserve is expected to continue increasing interest rates.

What can equity mutual fund investors do?

Since the Nifty 50 scaled 18,600 in Oct 2021, the markets have not moved up significantly. The past year and a half have been trying times for equity mutual fund investors who have not seen significant returns and even notional losses in their portfolios. There are analytical reports that suggest this trend may continue or worsen during the rest of 2023. However, this should not worry investors who are in the accumulation phase and have a long-term horizon. SIPs remain the best way to invest in equity mutual funds. Investors can also consider very short-term STPs or even lump-sum investments during market dips.??Investors who have a requirement for funds in the next 6 months can consider redeeming their investments.?

A short note on the impact of new rules regarding debt fund taxation

I have four different scenarios below that I believe are relevant for retail investors.

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SCENARIO 1?- If you have already invested a lump sum in debt funds, the change in taxation won't affect you.

SCENARIO 2?- If you have already invested a lump sum in international funds, the change in taxation won't affect you.

SCENARIO 3?- f you're investing in debt funds through SIPs, any investments made after April 1, 2023 will lose the benefit of long-term capital gains tax at 20% with indexation benefit. The impact will be relatively lesser here if you are in the lower tax brackets.??The impact could be higher if you are in the higher tax brackets but this can be managed to some extent by withdrawing in a structured manner.?

However, this is only one aspect of your investments. if you prioritized safety and liquidity in selecting debt funds, you can continue. Other advantages (over FDs) are that you can withdraw partially, and you don’t have to pay tax on accrual or TDS on redemptions.?

SCENARIO 4?- If you're investing in international funds through SIPs, any investments made after April 1, 2023 will lose the benefit of long-term capital gains tax at 20% with indexation benefit. Although the tax incidence goes up, there's no way to avoid it if you want to invest in international stocks via ETFs or FoFs. (fund of funds). These funds were chosen for the benefit of geographical diversification as well as potentially high returns and these reasons remain.

Our latest series of videos

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That’s all, folks. Have a great month ahead!

Disclaimer: Mutual fund investments are subject to market risks, read all scheme related documents carefully