Tag: investments

DSP MF launches Nifty Bank index fund amid banking sector revival: Should you invest?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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DSP Mutual Fund on Wednesday (May 15) announced the launch of the DSP Nifty Bank Index Fund. This is an open-ended scheme tracking the Nifty Bank Index. The fund offers investors an opportunity to get exposure to the 12 most liquid and large Indian banking stocks through a single fund, the mutual fund house said.

The new fund offer (NFO) of the scheme will close on May 27, 2024.

About Nifty Bank Index

The Nifty Bank Index is diversified with a composition of private as well as public sector banks.

Historically, the Nifty Bank Index has delivered much better long-term returns compared to the broader Nifty 50 Index.

Since January 2000, the Nifty Bank Index has grown 67 times compared to the Nifty 50 which grew 21 times over the same period.

However, the Nifty Bank Index is currently witnessing the longest stretch of underperformance compared to the Nifty 50 on a five-year rolling basis which has led to it being relatively better-placed in terms of sector valuations versus their historical averages as well as relative to other sectors.

Key financial metrics for banks like return ratios and capital adequacy have also been improving steadily.

Return on Assets (RoAs) of Indian banks have improved over three times from the lows of 2018.

Non-performing assets (NPAs) are also at one of the lowest levels.

With the sector trading at just a 5% premium to its 10-year average price-to-book multiple, and NPAs now at multi-year lows, it offers a decent entry point for investors to benefit from the banking sector’s likely resurgence.

Investment considerations

Anil Ghelani, CFA, Head of Passive Investments & Products at DSP Mutual Fund, emphasised the importance of a robust banking system for economic growth and development, particularly in a rapidly growing economy like India.

He recommended the DSP Nifty Bank Index Fund to investors with longer time horizons, citing the long-term performance of the Nifty Bank Index.

The favourable outlook for the banking sector further underscores the potential for the DSP Nifty Bank Index Fund NFO.

However, investors must tread cautiously, as the fund’s risk profile is reflected in its ranking on the Standard SEBI Risk-O-Meter as a Very High-Risk Fund.

The predominant exposure to equities, coupled with the concentration on the banking theme, amplifies the fund’s risk profile.

Moreover, there is the added risk of entering the market at all-time high levels.

Additionally, as an index fund, there is the inherent risk of tracking errors.

This could impact the fund’s returns relative to the underlying index.

In conclusion, investors should carefully assess their risk tolerance and investment horizon before considering this fund.

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These two mutual fund houses launch special opportunities funds: Should you invest?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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WhiteOak Capital Mutual Fund and SAMCO Mutual Fund have announced special opportunities funds to capitalise on market dynamics and special situations. While WhiteOak’s NFO is already open, SAMCO’s new fund offer (NFO) is set to open on Friday, May 17, 2024.

Special Opportunities Funds are designed to harness specific market scenarios such as corporate restructuring, regulatory changes, technological disruptions, emerging trends, and other similar instances.

These funds aim for long-term capital appreciation by identifying undervalued or overlooked opportunities.

WhiteOak Capital Special Opportunities Fund

WhiteOak Capital’s offering seeks to generate long-term capital growth by focusing on special situations like mergers, acquisitions, government policy changes, and technological innovations.

Aashish Somaiyaa, CEO of WhiteOak Capital Asset Management emphasised the importance of active management in identifying undervalued stocks and leveraging bottom-up stock selection strategies.

Ramesh Mantri, CIO of WhiteOak Capital Asset Management highlighted the fund’s objective to capitalise on temporary disruptions in stock prices.

“This presents buying opportunities for investors,” Mantri said.

The fund adopts a bottom-up approach to stock selection, aiming for potential alpha generation by maintaining a high active share.

SAMCO Special Opportunities Fund

SAMCO’s offering is built on a proprietary DISRUPTION model consisting of ten distinct sub-strategies.

This model enables the fund to systematically uncover special situations across various themes such as digitization, regulatory reforms, innovation, and emerging sectors.

Viraj Gandhi, CEO of SAMCO Mutual Fund, emphasised the fund’s flexibility, allowing it to pivot across sectors and themes to capture emerging trends.

Umeshkumar Mehta, CIO of SAMCO Mutual Fund, highlighted the tax efficiency and diversification advantages of the SAMCO Special Opportunities Fund.

By managing thematic investments internally and diversifying across sectors and themes, the fund aims to minimise tax implications and mitigate risk concentration.

Investment considerations

Special opportunities funds represent thematic equity schemes with significant flexibility across market capitalisation and sectors.

Unlike many flexicap schemes that exhibit considerable overlap with their benchmarks, special opportunities funds provide diversification benefits to investors.

By incorporating such a fund in their portfolio, investors can enhance diversification and potentially mitigate risk.

However, analysts caution that the high flexibility enjoyed by fund managers in this category may lead to portfolio overlapping with other schemes in the portfolio.

Investors should evaluate their existing holdings to ensure optimal allocation.

Currently, there are three existing funds in this space.

Here are the returns of the existing special opportunities funds:

(Source: Value Research)

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Short-term vs long-term investments: Which is better for you and when?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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When it comes to investing surplus money, individuals are often faced with the decision of allocating their funds based on their financial goals and timelines. The distinction between short-term and long-term investments plays a crucial role in shaping the outcome of one’s investment strategy.

Here’s a breakdown of when each type of investment makes the most sense.

Short-term investments

Short-term investments typically span from a few weeks to three years and offer various options such as cash equivalents, bonds, and fixed income securities.

As per Swati Saxena, Founder & CEO – 4 Thoughts Finance, these investments provide liquidity when needed and help prevent inflation from eroding the value of money by generating returns in the short run.

Advantages of short-term investments:

• Lower risk profile
• Short-term investments are less exposed to market fluctuations, making them suitable for short-term liquidity needs.
• Real rate of return
• According to Saxena, deploying short-term funds in the right investment options can generate returns, preserving the real value of money.
• Liquidity and accessibility
• Short-term investments offer flexibility, allowing investors to withdraw funds for unforeseen expenses or needs.

Points of caution

Saxena advises investors to avoid over-ambitious return expectations for short-term investments. “One should remain focused on investments aligned with the appropriate time horizon, avoiding distractions from short-term market noise. Investors should further seek guidance from active and neutral investment counsellors to maximise long-term outcomes,” he said.

Long-term investments

Long-term investments, held for more than three years, aim to accumulate wealth over time by focusing on assets like equity and real estate, which appreciate in value and offer compounding returns.

Advantages of long-term investments:

• Compound returns and growth
• Long-term investments leverage the power of compounding returns, leading to significant wealth accumulation over time.
• Mitigating market instabilities
• Long-term investments provide the opportunity to recover from short-term market fluctuations.
• Simplified approach
• Unlike short-term investments that require constant monitoring, Saxena believes that long-term investments allow investors to focus on assets expected to appreciate over time, with periodic portfolio rebalancing.

Disadvantages of long-term investments:

• Liquidity constraints
• Long-term investments are not suitable for meeting short-term needs, except in emergencies.
• Risk of volatility
• Long-term investments are subject to market fluctuations, and untimely exits may lead to real losses.
• Understanding risk and reward
• While long-term investments offer potential for good returns, investors must carefully assess the risks involved and align them with expected rewards.
• Striking the right balance

Achieving optimal wealth management involves striking a balance between short-term and long-term investments.

“By understanding the characteristics and advantages of each type of investment, along with having a solid investment plan, individuals can navigate their financial goals effectively,” Saxena said.

Ultimately, making informed decisions about investment horizons is key to maximising wealth and ensuring the realisation of financial objectives.

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This mutual fund has turned ₹10,000 SIP into ₹24.4 lakh in 10 years

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Since its inception on April 28, 2014, the Motilal Oswal Flexicap Fund has delivered a compounded annual growth rate (CAGR) of 17.17%. For perspective, this return means that if ₹10,000 were invested in the scheme as Systematic Investment Plan (SIP) every month, the investment would have grown to around ₹24.4 lakh as of March 28, 2024.

A lumpsum investment of ₹10,000 made in this fund since inception would have been ₹48,176 as of March 28, 2024.

About the fund

This is an open ended dynamic equity scheme investing across large cap, mid cap and small cap stocks.

The fund manages assets under management (AUM) of ₹9,660 crore.

In the last one year period, the fund gave 54.80%. In the last three and five years, the fund delivered 15.24% and 13.14% CAGR respectively.

The scheme is managed against Nifty 500 – TRI.

The fund is managed by Niket Shah.

Investment objective

The investment objective of the scheme is to achieve long term capital appreciation by primarily investing in equity and equity related instruments across sectors and market-capitalisation levels.

However, there can be no assurance or guarantee that the investment objective of the scheme would be achieved, Motilal Oswal Mutual Fund said.

Load structure

Exit load of 1% is applicable if investments are redeemed on or before 15 days from the date of allotment.

It is nil if investments are redeemed after 15 days from the date of allotment.

No exit load applies for switch between Motilal Oswal Focused Fund, Motilal Oswal Midcap Fund, Motilal Oswal Flexi Cap Fund, Motilal Oswal Large and Midcap Fund, Motilal Oswal Multi Asset Fund & Motilal Oswal Balanced Advantage Fund.

A look at periodic returns

(Source: Motilal Oswal Mutual Fund)

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Axis MF launches Nifty Bank Index Fund: Should you invest?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Axis Mutual Fund on Friday (May 3) launched Nifty Bank Index Fund. This open-ended index fund aims to track the Nifty Bank TRI. The new fund offer (NFO) of the scheme will be available till May 17, 2024.

Managed by fund managers Karthik Kumar and Ashish Naik, the fund aims to replicate the total returns of the Nifty Bank TRI, subject to tracking errors.

It will invest primarily in stocks comprising the underlying index, following a passive investment strategy.

Additionally, the fund may allocate a portion of its assets to debt and money market instruments to meet liquidity and expense requirements.

The minimum investment amount allowed will be ₹500 and in multiples of ₹1 thereafter.

The exit load applicable will be 0.25% if redeemed/ switched out within seven days from the date of allotment/ investment and no exit load if redeemed/ switched out after seven days from the date of allotment/ investment.

Investment strategy

The Axis Nifty Bank Index Fund adopts a passive investment strategy.

The index undergoes semi-annual rebalancing to ensure it accurately reflects the sector’s dynamics, incorporating companies that best represent its performance.

Rationale for investment

The launch of the Axis Nifty Bank Index Fund comes at a time when India’s banking sector continues to exhibit growth and resilience.

B Gopkumar, MD & CEO of Axis AMC, highlighted the sector’s promising trajectory, driven by robust regulatory frameworks and the rapid adoption of digital banking.

Investment considerations

According to Ashish Gupta, Chief Investment Officer at Axis AMC, the fund offers investors an attractive opportunity to gain exposure to India’s banking sector, which is poised to play a pivotal role in the country’s economic expansion.

“With increasing financial inclusion and a shift towards sophisticated banking services, the sector holds potential for significant returns,” Gupta said.

By investing in a diversified mix of large-cap and mid-cap banking companies, including both PSUs and private banks, the fund offers a cost-effective and efficient means to capitalise on the sector’s growth prospects.

However, prudent decision-making should always be based on individual financial goals, coupled with professional consultation when necessary.

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Over 1 crore mutual fund accounts ‘on hold’ due to incomplete KYC: What should investors do

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Approximately 1.3 crore mutual fund accounts are currently ‘on hold’ due to incomplete KYC (know your customer) compliance, according to media reports.

Notably, these accounts had their KYC processes completed using documents such as electricity bills, telephone bills, and bank account statements.

However, under the Securities Exchange Board of India’s (SEBI\) latest directive, these documents are now considered invalid for KYC purposes.

Officially valid documents include an Aadhaar card, passport, and voter ID card.

Consequently, investors with accounts flagged as ‘on hold’ are currently restricted from engaging in any transactions within mutual funds, whether buying or selling units.

Understanding the KYC status

KYC status serves as a crucial indicator of an individual’s compliance with regulatory requirements.

It is only when the submitted documents are duly accepted by the processing authority that an individual achieves KYC compliance.

Any subsequent modifications to personal records necessitate a KYC change request.

Accounts on ‘hold’

Swarup Mohanty, VC and CEO at Mirae Asset Investment Managers India, shed light on the urgency of addressing accounts on hold.

“Out of our almost 70 lakh folios, we have 76,500 folios, which are on hold.” Mohanty told CNBC-TV18.

He emphasised the importance of adhering to regulatory mandates and acknowledged the challenges posed by data assimilation and server capacity amid compliance activities.

Regarding the potential impact on systematic investment plan (SIP) numbers for April, Mohanty said it’s better to wait for industry data to assess the actual repercussions on investments.

Resolving the ‘on-hold’ status

The first step towards resolving the ‘on-hold’ status is to check one’s KYC status through designated KYC registration agencies (KRAs) such as KARVY, CVL, NDML, CAMS, and DOTEX.

For instance, if using the CVL KRA:

Step 1: Visit the CVLKRA website.

Step 2: Click on ‘KYC Inquiry’ at the top of the screen.

Step 3: Enter your PAN and click ‘Submit.’

Once the KYC status is determined, if one finds themselves in the ‘on hold’ category, they can initiate the resolution process.

This involves submitting an online request via the KRA or mutual fund portal to update details, thereby removing the hold status and allowing resumption of investment activities.

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SIP inflows hit record high in March, expert anticipates ₹25,000 crore milestone by 2024 end

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Systematic Investment Plan (SIP) inflows for March surged to a record high, standing at ₹19,271 crore compared to ₹19,187 crore in the previous month, according to data released by the Association of Mutual Funds in India (AMFI).

This marks the second consecutive month where SIP inflows have surpassed the ₹19,000 crore mark.

#MFData | March SIP inflows at ₹19,271 Cr vs ₹19,187 Cr (MoM)

Alert: March #SIP inflows at record high, above ₹19,000 cr for 2nd straight month pic.twitter.com/hccuVXUTLw

— CNBC-TV18 (@CNBCTV18Live) April 10, 2024

According to Swarup Anand Mohanty, Vice Chairman and CEO of Mirae Asset Investment Managers, SIP has emerged as a powerful tool in fostering financial discipline, particularly among young investors.

Mohanty expressed optimism about this consistent surge in SIP flows, foreseeing a potential milestone of ₹25,000 crore by the end of 2024.

Mohanty noted a shift in investor preferences in March.

Previously, equity inflows predominantly favoured mid and small-cap funds. However, March saw a slight halt in this trend, with many investors gravitating towards small-cap funds driven by high-return prospects.

Mohanty cautioned against disproportionate allocations to them and highlighted the inherent risks associated with overexposure in the long run.

In light of this, Mohanty advocated for a balanced approach to investment allocations.

He emphasised the importance of diversification across various segments such as flexicap, large-caps, and others.

He urged investors with significant exposure to small-cap funds to consider rebalancing their portfolios to mitigate potential risks and ensure long-term stability.

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Equity MF inflows decline 16% in March: Are investors worried amid shifting market trends?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Is your mutual fund account on ‘hold’? Here’s why this is happening and what you should do

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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If you’ve recently found your mutual fund transactions halted, including Systematic Investment Plans (SIPs), Systematic Transfer Plans (STPs), Systematic Withdrawal Plans (SWPs), or redemptions, your account might be in a state of limbo, marked as ‘on hold’.

But fret not, there’s a solution to this issue.

This snag in your investment journey arises from recent changes in Know Your Customer (KYC) norms, particularly regarding the necessity for a redo.

Investors whose KYC isn’t based on any of the ‘officially valid documents’ or whose email/mobile remains unverified are receiving this message.

Officially valid documents include an Aadhaar card, passport, and voter ID card. KYC based on proofs such as bank statements and utility bills are no longer valid.

Previously, investors were required to redo their KYC by submitting a physical KYC form along with the documents to mutual fund houses or Registrar and transfer agents (RTAs).

However, in a welcome move, this process has transitioned to online platforms.

So, what’s the solution?

The first step is to check your KYC status. The process can be done through designated KYC registration agencies (KRAs) such as KARVY, CVL, NDML, CAMS, and DOTEX.

For instance, if you opt to check through Central Depository Services Limited (CDSL) Ventures Limited – Know Your Customer Registration Agency (CVL KRA):

Step 1: Visit the CVLKRA website.

Step 2: Click on “KYC Inquiry” located at the top of the screen.

Step 3: Enter your PAN and click ‘Submit.’

Once you’ve determined your KYC status and if you find yourself in the ‘on hold’ category, you can initiate the resolution process.

This can be done by submitting an online request via your KRA or mutual fund portal to update your details.

This action can remove the hold status, allowing you to resume your investment activities.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Here’s where experts say you can put your money amid global economic uncertainty

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Investors may be reassessing their strategies amid the global economic flux and spreading geopolitical stress. In such an uncertain scenario, experts are advising investors to adopt short-term strategies with a long-term vision.

While expressing bullish sentiments on equities, R. Srinivasan, the Chief Investment Officer (CIO) for Equity at SBI Mutual Fund, stressed on the importance of aspirational consumption as a longstanding theme.

Despite recent volatility, Srinivasan is optimistic, particularly regarding small-cap funds, where a substantial cash position is maintained.

He expects a potential uptick in the investment cycle as economic recovery progresses.

Interestingly, Srinivasan revealed an absence of IT services in the SBI MF portfolio, attributing it to single-digit growth prospects, which fall short of their return expectations.

Rajeev Radhakrishnan, the CIO for Fixed Income at SBI Mutual Fund, addressed near-term challenges while highlighting India’s macro resilience.

Despite external headwinds, particularly concerning geopolitical tensions and fluctuations in crude oil prices, Radhakrishnan said he has confidence in India’s economic fundamentals.

He anticipates gradual inflation moderation, aligning with the central bank’s projections, which could influence RBI’s monetary policy decisions.

While acknowledging potential spillover effects from global events, Radhakrishnan refrained from predicting imminent rate cuts by the RBI.

The bottomline

Despite short-term uncertainties, sectors such as aspirational consumption, industrials, and infrastructure present compelling investment opportunities.

However, prudent risk management — including maintaining cash reserves and monitoring external factors — remains crucial.

As investors evaluate their portfolios, integrating long-term growth themes with resilience to near-term challenges emerges as a prudent strategy in any market environment.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow