Jayant Sinha, Minister of State for Finance met the CIOs of a few large fund houses and stock brokers to seek their suggestions to improve retail participation in equity market.
A CIO who had attended this meeting told Cafemutual that they have apprised Sinha about the reason behind the volatility in the market and measures the government could take to stabilize the markets. The CIOs reportedly told Sinha that FIIs are exiting Indian equity market not because of any fundamental risk in India but due to the crisis in their country because of declining crude oil prices. Hence, to stabilize the market, retail participation is the key.
In order to improve retail participation in the equity market, CIOs recommended introduction of mutual fund linked retirement plan (MFLRP) to attract long term money. Last year, SEBI had requested to the government to introduce MFLRPs under 80 CCD. SEBI had proposed that a long term product like mutual fund retirement plan with tax incentive can play a significant role in mobilizing household savings to the capital markets.
Another key recommendation was an additional tax exemption of Rs.50,000 for ELSS. This additional exemption would be over and above the deduction claimed under Section 80 C i.e. Rs.1.50 lakh. The CIO quoted above said, “Since 80 C space is already crowded, an additional tax emption of Rs.50,000 should be allowed for ELSS.”
The CIOs also requested Sinha to look into service tax issue of distributors.
Sinha assured that he will look into all these recommendations and asked CIOs to send these suggestions in writing at the earliest. It is understood that Leo Puri, Chairman, AMFI is seeking comments from the industry to draft this letter.
