Mutual Funds Prefer Local Scrips

Mumbai: Mutual fund houses are plucking their stock composition in favour of domestic markets to give their investors benefits of tax exemptions. Most fund houses are unveiling their global schemes in the ratio of 35:65. Mutual funds that infuse at least 65 per cent of their net assets in local stocks qualify as equity-oriented funds and hence do not attract the dividend distribution tax. The three global schemes that were unveiled recently Franklin Templeton's Equity Income Fund (35 per cent in emerging markets), Kotak Mahindra MF's Indo-World Infrastructure Fund and Tata MF's Indo-Global Infrastructure Fund are trying to give their investors both the tax sops and the benefits of diversification of portfolio.

Fidelity unveiled its International Opportunities Fund and India Growth Fund that has a mandate to invest up to 10 per cent in international equities. UTI Mutual Fund also has plans to unveil a global fund in tie-up with State Street Global Advisors, which will also invest at least 65 per cent in the Indian markets next year. But investment advisers feel that if diversification is the reason and investors put money in these funds, it makes little sense to invest in a fund allocating as much as 65 per cent to the Indian markets.