No directional departure

By Ashu Suyash, managing director and country head, Fidelity Fund Management Pvt. Ltd.

At a macro level, the finance minister has presented a budget that does not make a directional departure from previous editions. There is an emphasis on spending in the agriculture and infrastructure sectors, which is welcome as they were lagging the growth in manufacturing and services.

There were a few surprise announcements, which are sector specific, especially on IT and construction, but overall it is a neutral budget.

On the capital markets side, the announcement relating to individuals being permitted to invest overseas through mutual funds is a very welcome one. Although, the $50,000 limit for individuals existed, there hadn''t been too many takers given the complexity of investing overseas. We believe that this clarification will give investors a convenient and tested route to geographically diversifying their portfolios.

For the mutual fund industry, I think a key statistic is the savings rate that now stands at 32.4 per cent - a good 3 per cent more than the previous year and on a bigger gross domestic product (GDP) base. It is an indicator of the tremendous potential for mutual funds.

The increase in dividend distribution tax on dividends paid by money market mutual funds and liquid mutual funds will have a near term impact on funds in these categories. However, there had been indications in media reports that this was on the cards and it is not an entirely unexpected development. In the longer term, we believe that cash funds and bank deposits play different roles and they each have their own place in treasurers'' portfolios.