MF industry may see several mergers of schemes in coming weeks


The mutual fund industry may witness several mergers of schemes in coming weeks after the Budget proposed an exemption from capital gains tax in case of amalgamation of funds with similar features.

The government’s move could lead to further consolidation in the nearly Rs. 12 lakh crore mutual fund industry.

“This is a positive move as it will allow fund houses to consolidate schemes that are running a similar strategy.

“Consolidating these schemes would lead to lesser number of schemes and operationally efficient management,” said Feroze Azeez, Director and Head, Investment Products, Anand Rathi Private Wealth.

Echoing similar views, Suraj Kaeley, Group President and Head of Sales and Distribution, UTI MF, said: “We will see several mergers in open-ended schemes in coming weeks as the Budget proposed tax neutrality in case of merger of MF schemes with similar features.

“The move will also help in product rationalisation.”

Mutual Fund is an investment vehicle with a pool of funds collected from investors to buy securities such as stocks, bonds, money market instruments and similar assets.

Finance Minister Arun Jaitley, in his Budget speech, had proposed tax neutrality in case of merger of MF schemes with similar features, on which investors had to pay capital gains tax earlier.

“It is proposed to amend the provisions of the Income Tax Act so as to provide tax neutrality on transfer of units of a scheme of a mutual fund under the process of consolidation of schemes of Mutual Funds as per Sebi Regulations, 1996,” the Minister had said.

According to experts, the consolidation will also provide clarity in terms of the investment objective of different schemes available with each fund house and will help investors take appropriate investment decisions.

“It is in favour of MF investors and AMCs as we expect industry to consolidate more schemes in near future.