What corporate tax cuts mean for Mutual Fund investors

Good news is like your best friend, it drops in when you least expect it. Last week’s impromptu announcement by the Finance Minister was much the same, dropping in unannounced but still welcome. 

While everyone had been talking in hushed tones about an impending slowdown for the past few months, the news of the reduced corporate tax rates from 34.9% to 25.2% came as big boost for most corporates. 

So while it’s great for everyone around, how does it really make things exciting for the common investor, i.e. you? This announcement itself made the Sensex jump a significant 5.32% in a single day. So, if you had invested in an equity-related fund, it sure would have bolstered your confidence in the market. In simple terms, it means that the equity market gets a major boost thanks to the bump in Earnings Per Share (EPS) for most listed companies and effectively all equity-based funds. 

So, what is EPS?

Earnings Per Share = Net Income after Tax/Total Number of Outstanding Shares 

This means that as a result of the tax cut, the net income of a company goes up, which effectively increases the earnings potential.

According to estimates by various financial research firms, NIFTY as a whole could see around 8-10% increase in EPS for FY21 and around 20 NIFTY companies could see EPS revision upwards of around 10%.

With overall investor sentiment boisterous, it seems like a good time to welcome that best friend and look at your investment portfolio with renewed interest.

Here are some of the Top-Rated Large Cap Funds you can consider and start your SIPs:

Axis Bluechip Fund – Growth
Reliance Large Cap Fund – Growth
ICICI Prudential Bluechip Fund – Growth

Available only on Android. Explore Mutual Funds on Freecharge here.

*Mutual fund investments are subject to market risks, read all scheme related documents carefully. The funds mentioned above are not to be viewed as recommendations. You may chose funds according to your investment needs.

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