Mutual funds may gain as market-linked debentures lose tax sop: Analysts
Live MintIndian mutual funds may see an increase in inflows and non-bank lenders may move towards more traditional corporate bonds after the government removed a tax arbitrage available to so-called market-linked debentures, analysts said. "MLDs were issued by NBFCs and this was a tax haven for HNIs, but it may become a thing of the past era after the budget announcement making MLDs now be fully taxed," said Venkatakrishnan Srinivasan, founder and managing partner of debt advisory firm Rockfort Fincap. "Usually, MLDs comes at a lower rate and now the borrowers would move to normal NCDs and will have to pay slightly higher rates," said Soumyajit Niyogi, director, core analytical group at India Ratings and Research. "MLDs will lose flavour and the money that was getting invested into MLDs will flow into Debt Schemes of MFs/Real Estate Assets/higher yielding papers/Perps and sub debt of Banks and NBFCs," said Sujatha Guhathakurta, president, debt capital market and infrastructure financing at Kotak Mahindra Bank.
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