Nov 23, 2016 2 min read

Demonetisation - The Game Changer for Mutual Fund Industry

Demonetisation has caused a great impact on the Indian economy. While reading this blog, you will come to know how the mutual fund industry has been affected with this move.

In order to curb black money out of India, PM Narendra Modi has made a great move of demonetisation of the high denomination currency notes. Although this move started on a good motive, the people are now suffering from lack of money. On the other side, different industries have been impacted in distinct ways and are expected to become stable after a considerable time period.

So let us know the views of the mutual fund industry experts regarding the effects of demonetisation on mutual fund investments:

  1. Demonetization will lead to rising cash inflows in banks and hence the savings will be increased which will cause mutual fund investments to witness heavy benefits over a longer period of time.
  2. Banks will reduce the fixed deposits rates due to which investors would seek alternatives for investing their money. Debt mutual funds, in this case, would be helpful for them, and hence the investors will start investing in the debt scheme to gain substantial returns. Henceforth, the mutual fund industry would get benefited in this manner.
  3. Equity mutual funds invest in substantial stocks and shares which do well in the long term. Due to demonetisation, the stock market is facing a downfall leading to a fall in the investment values of the investors. By investing the capital in good equity schemes, you can overcome the uncertainty and gain remarkable income. For now, mutual fund equities are the best source to secure wealth.
  4. Now many people will come under the tax bracket which would lead to the rise in the attentiveness of ELSS as an option to save on taxes and make a worthy investment. This will give a boom to the MF industry with a rising demand of tax-efficient equity schemes.
  5. In the short run, due to increase in demand of high liquidity, the short-term debt funds would be chosen by the investors to gain good returns in order to accomplish the instant cash requirement.
  6. With the rising demand of money for a temporary period, the short-term earnings for the liquid fund schemes would rise thus benefiting the whole mutual fund industry.
  7. The returns offered by mutual fund investments do not get affected by inflationary changes as they are made in accordance with the parameters related to inflation. Hence, one gets the opportunity to earn the assured benefits irrespective of fluctuations in the market rates.

After a certain period when the economy shall be on a stable track again, banks with huge deposits would find the best way of investing in mutual funds to gain better returns for the depositors. This might take time, but the future consequences would be appreciable and advantageous.

Accordingly, investors have the best option of investing their monies in the mutual fund industry as it is consequently among the top gainers due to demonetisation, and would definitely yield maximum earnings for your future.

If you need assistance or advice on investing in the right mutual fund scheme, you must take our advisory services and avail the benefits of online investment solutions. MySIPonline.com is devoted to serving your investing needs and help you achieve your investment goals.

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