Interest among Indian fund houses for launching Rajiv Gandhi Equity Saving Schemes (RGESS) has picked up. India's largest fund house HDFC Mutual Fund is the latest to file its draft paper for the same with the capital markets regulator.
After witnessing a slow start last month after the capital markets regulator issued its circular in the first week of December, the momentum seems to have picked up of late.
For instance, so far in January alone five fund houses have filed their draft papers with the Securities and Exchange Board of India (Sebi). UTI AMC, LIC Nomura, IDBI Mutual Fund and SBI MF are the other along with HDFC MF which have filed drafts with the regulator this month. Last month, DSP BlackRock was the first fund house to come forward with its RGESS initiative.
The scheme which is in line with the tax saving category, allowing new investors to have tax benefits on an investment of Rs 50,000. Ever since the proposal for the same was placed by the former Finance Minister in the previous Union Budget; Sebi, Amfi and fund houses had been lobbying hard to allow mutual funds to be a vehicle for RGESS as it was not recommendable for new investors to directly invest in the stock markets.
Industry executives believe that the step taken by the government is a positive move and will help attract retail towards equity markets through mutual funds. Experts also add that if all goes well and retail show interest in the scheme which provides tax rebate, large domestic savings could be channelise into the equity markets with a lock-in period of three years.
Currently, penetration of equity mutual fund products stands less than 2 percentage point. Putting together all equity-related schemes, there are only 3.5 crore equity accounts in a country of 1.2 billion people. And on top of it, it is not necessary that all these accounts are unique investors. Industry officials put unique individual equity investors at less than 2 crore.
As on 31 December, industry's overall assets under management (AUM) stood at Rs 7.6 lakh crore while the equity portion of it contributed Rs 1.91 lakh crore. Currently, sector offers 345 equity-related products to investors.
