Depth to corporate debt market

COMMENT/ Milind Barve, MD, HDFC Mutual Fund

The Budget had a lot of positives for the mutual fund industry especially the increase in the limit of investments in foreign securities and the doing away of the 10% reciprocal shareholding clause.

There is a need for domestic investors to diversify their savings avenues. This measure will help provide an opportunity for domestic investors to choose non-rupee denominated asset classes as an effective diversification tool vis-à-vis domestic funds. The clarification regarding tax benefits on distribution tax relating to close-ended equity oriented funds was also welcome.

From a capital markets perspective his measures addressing investments by FII's in the domestic debt markets are welcome. The increase in overall investment limits will ensure a greater depth in the corporate debt market.

The announcement of a single unified exchange traded market for corporate bonds and the inclusion of qualified mutual funds and pension funds therein must be considered as a major highlight of this budget from a mutual fund industry standpoint.

This will ensure a focused area for operation and can lead to greater liquidity in corporate bonds, a much-needed criterion for a much deeper and credible pricing environment.