Equity Mutual Fund returns have been superb in the last 1 year. Investment in equity mutual funds has fetched very good returns and money flowing into equity funds through Systematic Investment plans has been steady. To give a further boost to mutual fund investment, many investors are expecting that the government may withdraw Long Term Capital Gains (LTCG) on equity mutual funds.
Will the government cut LTCG?
If one has to hazard a guess, than it would simply be against the government making a cut to Long Term Capital Gains.
This is based on the fact that stock markets are at a record high and they do not need a booster doze as such. Equity flows into mutual funds has also been steady, which means there is no reason to needlessly go for a revenue loss.
Many are betting that the government would go for an income tax cut or some benefits under SEC80C. If that were to happen, it is extremely doubtful that the government would also offer a cut in LTCG.
It's important to remember that the government in all probability is likely to face the prospects of fiscal deficit slippage. This means that there is very little room, to offer too many sops in the Union Budget.
It's unlikely that the government would offer income tax sops and LTCG sops together. In case, both do not go through, there is a high probability that we well see some reaction in stocks.