Mr. Krishnamurthy Vijayan is a veteran in the mutual fund industry with a background of 15 years. He honed his skills in UTI where he was part of various prestigious projects including organisational review, technology upgrade project, setting up of Registrar Co-ordination Cell and starting UTI – Institute of Capital Markets. He then moved on to Jardine Fleming and worked on the team that set up its mutual fund business in the country.
In an interview with Personalfn, Mr Krishnamurthy gave his candid views on how the budget measures up to their expectations, the impact of dividend tax and the driver for the industry going forward.
PFN: How do you rate the budget in general?
Mr. Vijayan: The budget is in line with our expectations, though it could have been a little kinder to the tax paying Indian. While the current circumstances do not permit much lee-way for the Finance Minister, the drastic reduction in section 88 benefits and the removal of the distribution tax provisions seem unnecessary.
PFN: Has the budget measured up to JM Mutual Fund's pre-budget wishlist?
Mr. Vijayan: It has fallen short of our wish list only on three counts i.e. the tax provisions mentioned above; lack of any alternative measures to encourage investors to save long term with mutual funds; and the absence of alternative avenues which are available for mutual funds viz. pension and provident fund management.
PFN: Imposition of tax on dividends is a major negative. What is the impact over the short term and long term?
Mr. Vijayan: We do not expect a major impact on mutual funds of the removal of dividend taxes, in the short term, since currently investors are awaiting the next round of dividend announcements.
In a way this measure could be a blessing in disguise, since the industry was beset with the problems of large short term investors who were coming in close to dividend date and withdrawing within 3 months. As such we hope to attract more long term investments. The 80 M benefit will also be a good measure.
PFN: What are the mutual fund-related issues you believe were left unaddressed by the finance minister?
Mr. Vijayan: Mutual funds have the expertise and the transparency to be trusted with long term security money of individuals - i.e. pensions, provident funds and 401K like savings. Unfortunately, the strides made by the industry in being far more transparent than banks and other savings avenues, has not been recognised. We are yet to be given the permission (and more importantly the recognition) that would enable us to manage long term money.
PFN: Going forward what in your view will be the growth driver for the mutual fund industry?
Mr. Vijayan: Historically, tax incentives have driven mutual funds. Investors want some added advantage for taking the additional risk of investing in an avenue, which does not assure returns. However, given that this is not available, we will have to continue to strive to convince people that the greater transparency and compliance that we provide is a far better long term assurance of safety than the veil drawn by assured return avenues across what they do with the money invested with them.
PFN: Which sectors/companies look more attractive after the budget?
Mr. Vijayan: Infrastructure related industries of course look most favourable. However I think IT and media and entertainment still hold a lot of promise in the medium term.