Lured by the Union Budget proposal of exempting the mutual funds from dividend tax coupled with decreasing of yield in the debt market, the mutual fund companies are gearing up to introduce high yield dividend schemes. Two funds-Birla Mutual and Escorts Mutual-have already announced their plans to introduce high yield dividend schemes.
In fact, Birla Mutual Fund launched the scheme last month on the expectation that the tax from dividend income will be abolished. The expectation also induced Escorts to apply for the Sebi approval for the scheme. Experts said a host of such schemes, which will restrict their investments in companies having high yeild dividend earning records, would follow suit. They added that 2003 would witness introduction of many high yield dividend schemes as 2002 was the year of mid-cap products.
Reliance Capital Mutual Fund chief investment officer K Rajagopalan said the budget proposals made investments in equity schemes of mutual funds attractive by abolishing tax from all funds.
Rajagopalan, however, did not say for certain whether his company would like to introduce such scheme.
