How will Budget 2023 impact your mutual funds?

Finance Minister Nirmala Sitharaman didn’t have anything for mutual fund investors in the Budget 2023. Many investors were hoping that the finance minister would offer parity on LTCG tax, DLSS along the lines of ELSS, better deal for fund of funds, clarity on international funds, among others. However, the budget was silent about these things. Certain proposals granted by the finance minister would indirectly affect the mutual funds.

Increased spending on sectors like infrastructure, energy and push to the banking sector will impact mutual funds investing in these sectors. The finance minister also pressed on making KYC simpler to increase access to financial products. “The KYC process will be simplified by adopting a ‘risk-based’ instead of ‘one size fits all’ approach. The financial sector regulators will also be encouraged to have a KYC system fully amenable to meet the needs of Digital India,” Finance Minister Niramala Sitharaman said in her speech.

Mutual fund industry experts say that this will be a good move for mutual fund investors as well. “A simplified KYC regime is a major benefit and will attract more investors to capital markets and investment products. We are witnessing a boom in the financialization of savings nationwide, and simplifying the process will only accelerate this trend,” says Radhika Gupta, CEO, Edelweiss Mutual Fund.

Sure, the finance minister announced some changes in personal taxation that may cheer taxpayers in the new tax regimes. However, the finance minister did not grant anything from the long wishlist in the budget. Sure, all the spending on infrastructure and sops to MSME would help economic growth and boost the sentiment in the stock market. However, your mutual fund strategy should be based on your financial plan and your asset allocation plan.
Financial planners and mutual fund advisors always caution investors to make any investment decisions based on budget proposals or absence of them. They remind investors that all such good proposals or gains would appear as small blips when you look back after 10 or 20 years.