Return of liquid funds will be reduced due to stamp duty, know how
Investors keep their money in these schemes for a short period.
Stamp duty will be collected on July 1, i.e. from today, on the purchase of liquid funds. It will be charged at the rate of 0.005 per cent. Then, whether this purchase is lump sum or through systematic investment plan ie SIP, in both cases, duty will be levied. This will further reduce the returns of liquid mutual fund schemes.
Investors park their money in these schemes for short periods. The lower the holding period, the greater the effect. This step can have an impact on large institutional investors. They usually keep their money in liquid schemes for short periods.
“The shorter the holding period, the greater the impact on returns,” says Kostubh Belapurkar, director (fund research), Morningstar India.
Many corporate treasuries keep money in liquid schemes for short periods. It is kept to meet working capital requirements. ICICI Mutual Fund report shows that due to the stamp duty, the returns for one day holding period can be reduced by up to 1.82 per cent annually. For seven days, the decrease can be 0.26 percent. As the holding period increases, the effect will decrease. If the investment is kept for 15 days, then the investor will lose 0.12 percent. At the same time, in 30 days it will be 0.06 percent.
Of course, the corporate investor should stop keeping his money in liquid schemes for a day or two. However, they will still be forced to keep money in this product for 15-30 days.
Amol Joshi, founder of Plan Rupee, says, “We will continue to invest in corporate liquid and short-term funds.” The reason for this is that they do not get anything on the current account of the bank. Short-term FD rates are even lower. ”
According to Value Research, the average return from the liquid scheme category has come down to 5.2 per cent in the last one year. This has happened due to the fall in interest rates. At the same time, recovery from stamp duty will put further curb on returns. From July 1, liquid funds are required to keep 20 per cent of their corpus in cash and government securities such as liquid assets. Returns will be less than this.