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  • Financial Planning

    In finance, investment is putting money into an asset with the expectation of capital appreciation.

  • Mutual Funds

    When it comes to the world of investing, three words come to mind: overwhelming, intimidating, and scary.

  • Time for changes

    Bottoms in the investment world don't end with four-year lows; they end with 10- or 15-year lows.

  • Solution

    The stock market is filled with individuals who know the price of everything, but the value of nothing.

Equity

Equity funds are considered to be the more risky funds as compared to other fund types, but they also provide higher returns than other funds. It is advisable that an investor looking to invest in an equity fund should invest for long term i.e. for 3 years or more. There are different types of equity funds each falling into different risk bracket. In the order of decreasing risk level, there are following types of equity funds:

   

Aggressive Growth Funds: In Aggressive Growth Funds, fund manager aspire for maximum capital appreciation and invest in less researched shares of speculative nature. Because of these speculative investments Aggressive Growth Funds become more volatile and thus, are prone to higher risk than other equity funds.
   

Growth Funds - Growth Funds also invest for capital appreciation (with time horizon of 3 to 5 years) but they are different from Aggressive Growth Funds in the sense that they invest in companies that are expected to outperform the market in the future. Without entirely adopting speculative strategies, Growth Funds invest in those companies that are expected to post above average earnings in the future.
   

Speciality Funds: Speciality funds have stated criteria for investment and their portfolio comprises of only those companies that meet their criteria. Criteria for some speciality funds could be to invest/not to invest in particular regions/companies. Speciality funds are concentrated and thus, are comparatively riskier than diversified funds. These are following types of speciality funds:

a) Sector Funds: Equity funds that invest in a particular sector/industry of the market are known as Sector Funds. The exposure of these funds is limited to a particular sector (say Information Technology, Auto, Banking, Pharmaceuticals or Fast Moving Consumer Goods) which is why they are more risky than equity funds that invest in multiple sectors.

b) Foreign Securities Funds: Foreign Securities Equity Funds have the option to invest in one or more foreign companies. Foreign securities funds achieve international diversification and hence they are less risky than sector funds. However, foreign securities funds are exposed to foreign exchange rate risk and country risk.

c) Mid-Cap or Small-Cap Funds: Funds that invest in companies having lower market capitalization than large capitalization companies are called Mid-Cap or Small-Cap Funds. Market capitalization of Mid-Cap companies is less than that of big, blue chip companies (less than Rs. 2500 crores but more than Rs. 500 crores) and Small-Cap companies have market capitalization of less than Rs. 500 crores. Market Capitalization of a company can be calculated by multiplying the market price of the companys share by the total number of its outstanding shares in the market. The shares of Mid-Cap or Small-Cap Companies are not as liquid as of Large-Cap Companies which gives rise to volatility in share prices of these companies and consequently, investment gets risky.

   

Diversified Equity Funds - Except for a small portion of investment in liquid money market, diversified equity funds invest mainly in equities without any concentration on a particular sector(s). These funds are well diversified and reduce sector-specific or company-specific risk. However, like all other funds diversified equity funds too are exposed to equity market risk. One prominent type of diversified equity fund in India is Equity Linked Savings Schemes (ELSS). As per the mandate, a minimum of 90% of investments by ELSS should be in equities at all times. ELSS investors are eligible to claim deduction from taxable income (up to Rs 1 lakh) at the time of filing the income tax return. ELSS usually has a lock-in period and in case of any redemption by the investor before the expiry of the lock-in period makes him liable to pay income tax on such income(s) for which he may have received any tax exemption(s) in the past.
   

Equity Index Funds - Equity Index Funds have the objective to match the performance of a specific stock market index. The portfolio of these funds comprises of the same companies that form the index and is constituted in the same proportion as the index. Equity index funds that follow broad indices (like S&P CNX Nifty, Sensex) are less risky than equity index funds that follow narrow sectoral indices (like BSEBANKEX or CNX Bank Index etc). Narrow indices are less diversified and therefore, are more risky.
   

Value Funds - Value Funds invest in those companies that have sound fundamentals and whose share prices are currently under-valued. The portfolio of these funds comprises of shares that are trading at a low Price to Earning Ratio (Market Price per Share / Earning per Share) and a low Market to Book Value (Fundamental Value) Ratio. Value Funds may select companies from diversified sectors and are exposed to lower risk level as compared to growth funds or speciality funds. Value stocks are generally from cyclical industries (such as cement, steel, sugar etc.), which make them volatile in the short-term. Therefore, it is advisable to invest in Value funds with a long-term time horizon as risk in the long term, to a large extent, is reduced.
   

Equity Income and Debt Yield Funds: The objective of Equity Income or Dividend Yield Equity Funds is to generate high recurring income and steady capital appreciation for investors by investing in those companies which issue high dividends (such as Power or Utility companies whose share prices fluctuate comparatively lesser than other companies share prices). Equity Income or Dividend Yield Equity Funds are generally exposed to the lowest risk level as compared to other equity funds.

DEBT FUNDS

Funds that invest in medium to long-term debt instruments issued by private companies, banks, financial institutions, governments and other entities belonging to various sectors (like infrastructure companies etc.) are known as Debt / Income Funds. Debt funds are low risk profile funds that seek to generate fixed current income (and not capital appreciation) to investors. In order to ensure regular income to investors, debt (or income) funds distribute large fraction of their surplus to investors. Although debt securities are generally less risky than equities, they are subject to credit risk (risk of default) by the issuer at the time of interest or principal payment. To minimize the risk of default, debt funds usually invest in securities from issuers who are rated by credit rating agencies and are considered to be of Investment Grade. Debt funds that target high returns are more risky. Based on different investment objectives, there can be following types of debt funds:

1) Diversified Debt Funds: Debt funds that invest in all securities issued by entities belonging to all sectors of the market are known as diversified debt funds. The best feature of diversified debt funds is that investments are properly diversified into all sectors, which results in risk reduction.

2) High Yield Debt Funds: As we now understand thatrisk of default is present in all debt funds, and therefore, debt funds generally try to minimize the risk of default by investing in securities issued by only those borrowers who are considered to be of investment grade. But, High Yield Debt Funds adopt a different strategy and prefer securities issued by those issuers who are considered to be of below investment grade. The motive behind adopting this sort of risky strategy is to earn higher interest returns from these issuers. These funds are more volatile and bear higher default risk, although they may earn at times higher returns for investors.

3) Assured Return Funds: Although it is not necessary that a fund will meet its objectives or provide assured returns to investors, but there can be funds that come with a lock-in period and offer assurance of annual returns to investors during the lock-in period. Any shortfall in returns is suffered by the sponsors or the Asset Management Companies (AMCs). These funds are generally debt funds and provide investors with a low-risk investment opportunity. However, the security of investments depends upon the net worth of the guarantor (whose name is specified in advance on the offer document). To safeguard the interests of investors, SEBI permits only those funds to offer assured return schemes whose sponsors have adequate net-worth to guarantee returns in the future. In the past, UTI had offered assured return schemes (i.e. Monthly Income Plans of UTI) that assured specified returns to investors in the future. UTI was not able to fulfill its promises and faced large shortfalls in returns. Eventually, government had to intervene and took over UTIs payment obligations on itself. Currently, no AMC in India offers assured return schemes to investors, though possible.

4) Fixed Term Plan Series: Fixed Term Plan Series usually are closed-end schemes having short-term maturity period (of less than one year) that offer a series of plans and issue units to investors at regular intervals. Unlike closed-end funds, fixed term plans are not listed on the exchanges. Fixed term plan series usually invest in debt / income schemes and target short-term investors. The objective of fixed term plan schemes is to gratify investors by generating some expected returns in a short period.

ANALYSIS OF DEBT AND EQUITY FUND
Debt Funds

- They must be repaid or refinanced.

- Requires regular interest payments. Company must generate cash flow to pay.

- Collateral assets must usually be available.

- Debt providers are conservative. They cannot share any upside or profits. Therefore, they want to eliminate all possible loss or downside risks.

- Interest payments are tax deductible.

- Debt has little or no impact on control of the company.

    Debt allows leverage of company profits.

Equity Funds

- They can usually be kept permanently.

- No payment requirements. May receive dividends, but only out of retained earnings.

- No collateral required.

- Equity providers are aggressive. They can accept downside risks because they fully share the upside as well.

- Dividend payments are not tax deductible.

- Equity requires shared control of the company and may impose restrictions.

    Shareholders share the company profits.

Importance of using Debt Funds:

    Debt is not an ownership interest in the business. Creditors generally do not have voting power.

- The payment of interest on debt is considered a cost of doing business and is fully tax deductible.

Importance of using EquityFunds:

    Unlike obligation of debt, your business will not have any contractual obligation to pay for equity dividend
    Equity financing also allows your business to obtain funds without incurring debt, or without having to repay a specific amount of money at a particular time.

Equity financing also allows your business to obtain funds without incurring debt, or without having to repay a specific amount of money at a particular time. Recent deals by equity funds are much larger than in the past. And debt funds are now doing larger club deals. Both types of funds have more money under management than ever before. More cash is chasing deals, causing overlap where both types of funds vie over the same company.


Market Watch
  • MF News
  • IPO News

Mahesh Patil Mahesh Patil of Birla Sun Life believes that the Street currently could be reacting to cues such as higher current account deficit (CAD), pressure on the rupee and developments around fiscal deficit as well.
Fri, 22 Sep 2017 10:31:54 +0530


Here is a fundamental view on the market from Sunil Subramaniam Watch the interview of Sunil Subramaniam, CEO at Sundaram Mutual Fund with Prashant Nair and Ekta Batra on CNBC-TV18, in which he shared his readings and outlook on market and specific stocks.
Tue, 19 Sep 2017 12:25:49 +0530


Shweta Jain SIP work irrespective of market sentiment. Marry the SIP with your financial goal and you are home.
Tue, 19 Sep 2017 09:50:25 +0530


Sunil Singhania Says economy will continue to grow and that will drive up the equity markets going forward.
Mon, 18 Sep 2017 10:16:49 +0530


Rajeev Thakkar Among the new theme that they have added is Facebook, which is an international stock, said Rajeev Thakkar, Chief Investment Officer and Director, PPFAS MF.
Fri, 15 Sep 2017 16:24:18 +0530


Joydeep Sen Only a fund with a relatively smaller corpus size can be quickly repositioned; a large fund will have the baggage of existing portfolio which should not be disturbed.
Thu, 14 Sep 2017 09:53:45 +0530


Vaibhav Agrawal Unlike other instruments like PPF, NSC and Long term deposits, an ELSS is a long-term wealth creator due to its consistent equity exposure.
Tue, 12 Sep 2017 11:26:33 +0530


Harsha Upadhyaya Kotak MF’s Upadhyaya said that September and December could be slightly better quarters due to GST-hit sectors seeing some recovery.
Tue, 12 Sep 2017 10:27:33 +0530


Lack of jobs in economy a worry; may see job growth once GST effect reduces: Axis MF In an interview to CNBC-TV18, Chandresh Kumar Nigam, MD CEO of Axis Mutual Fund, spoke about his reading of the market and his outlook on inflows into equity mutual funds (MFs).
Thu, 07 Sep 2017 14:23:12 +0530


Anand Radhakrishnan To celebrate the Mutual Fund Day that falls on every 7 day of the month, CNBC-TV18 spoke to Anand Radhakrishnan, CIO- Equity, Franklin Templeton Investments. Last month mutual funds saw a record inflows to the tune of Rs 20,000 crore.
Thu, 07 Sep 2017 12:13:40 +0530


S Krishna Kumar Companies such as Bajaj Finance and Capital First, among others, have been able to innovate, use technology, disrupt markets and gained advantage among competitors to pursue higher growth.
Thu, 07 Sep 2017 12:02:14 +0530


Joydeep Sen The average SIP size is Rs 3,250 and the month-wise collection through SIPs is just under Rs 5,000 crore per month now. It shows investors are walking in the right direction.
Thu, 07 Sep 2017 11:03:32 +0530


Hybrid funds - A balanced approach to investing Balanced, MIPs, Equity Savings and Dynamic Allocation are categorized as Hybrid funds
Thu, 07 Sep 2017 10:53:29 +0530


Milind Barve CNBC-TV18#39;s Nimesh Shah caught up with Milind Barve, MD, HDFC AMC from the side-lines of Motilal Oswal Conference and asked him if the domestic flows are sustainable at the pace at which mutual funds (MFs) are getting it and the trend in mutual funds will continue going ahead.
Wed, 06 Sep 2017 14:53:00 +0530


Nimesh Shah Nimesh Shah of ICICI Prudential AMC says when you are managing money in fiduciary capacity it is important to have a balanced approach while investing in market.
Tue, 05 Sep 2017 14:01:27 +0530


Prataap Snacks IPO kicks off today: 10 things you should know before invest Promoters including Sequoia Capital GFIV Mauritius Investment (SCG), Sequoia Capital India Growth Investment Holdings I and SCI Growth Investments II hold 92.67 percent stake in the company and the rest is held by public.
Fri, 22 Sep 2017 19:29:03 +0530


Prataap Snacks’ IPO opens. What are brokerages saying about the issue? Multiple brokerages recommend subscribing to the issue with a long term perspective as valuations could be higher from some perspective. But the business has a strong potential to grow ahead, they said.
Fri, 22 Sep 2017 18:19:50 +0530


Arijit Basu Among all insurance initial public offerings (IPOs), State Bank of India#39;s SBI Life commanding a valuation of Rs 70,000 crores is fully subscribed. In an interview to CNBC-TV18, SBI Life#39;s MD CEO Arijit Basu spoke about the response the IPO has garnered.
Fri, 22 Sep 2017 15:03:26 +0530


Scope for margin improvement; should grow more than market: Prataap Snacks The Prataap Snacks initial public offering (IPO) opens for subscription today. In an interview to CNBC-TV18, Amit Kumat, MD CEO of Prataap Snacks spoke about the latest happenings in his company and sector.
Fri, 22 Sep 2017 12:25:10 +0530


Capacit#39;e Infraprojects to list equity shares on exchanges on September 25 The Rs 400-crore initial public offering of Capacit#39;e has oversubscribed 183.03 times.
Fri, 22 Sep 2017 12:24:24 +0530


SBI Life Insurance IPO oversubscribed 3.6 times on strong QIB demand SBI Life Insurance Company#39;s initial share sale offer has received good response from qualified institutional investors on the last day.
Fri, 22 Sep 2017 11:14:25 +0530


Prataap Snacks raises Rs 143 cr from anchor investors The shares would be alloted to 15 anchor investors at Rs 938, which is the upper end of the price band, the company informed to the stock exchanges.
Fri, 22 Sep 2017 07:38:09 +0530


Matrimony.com has a weak debut on D-Street; ends 8.5% lower The online matchmaking services provider listed at its issue price of Rs 985, the higher end of price band.
Thu, 21 Sep 2017 16:53:14 +0530


Subscribe to Prataap Snacks : HEM Securities HEM Securities has come out with its report on Prataap Snacks IPO , The research firm has recommended to “ Subscribe ” the IPO in its research report as on September 20, 2017
Thu, 21 Sep 2017 16:19:16 +0530


Bandhan Bank IPO to hit markets next fiscal The Reserve Bank of India#39;s guidelines mandated the bank to get itself listed within three years from the commencement of banking operations. The bank started its operation in August 2015.
Thu, 21 Sep 2017 16:02:11 +0530


Lemon Tree Hotels files IPO papers with Sebi The public offer comprises sale of up to 195,797,000 equity shares by the existing shareholders, including Maplewood, Whispering Resorts, Palms International and RJ Corp, according to the draft red herring prospetus (DRHP).
Thu, 21 Sep 2017 13:50:10 +0530


Online match-maker Matrimony.com lists at issue price of Rs 985, but gains 3% later The company raised Rs 500 crore through the issue that comprised of fresh issue of up to Rs 130 crore and an offer for sale of up to 37.67 lakh equity shares.
Thu, 21 Sep 2017 10:05:04 +0530


SBI Life IPO – Get insured for life by paying the premium While every good thing comes at a price, so is the IPO (initial public offer) of SBI Life. Long term investors should lock in to this offer for a safe journey.
Wed, 20 Sep 2017 22:34:40 +0530


Matrimony.com to debut on bourses on September 21 The final issue price is fixed at Rs 985, the higher end of price band.
Wed, 20 Sep 2017 15:31:22 +0530


Subscribe to SBI Life Insurance Company : Ajcon Global Ajcon Global has come out with its report on SBI Life Insurance Company , The research firm has recommended to “ Subscribe ” the IPO in its research report as on September 19, 2017
Wed, 20 Sep 2017 11:46:06 +0530