In the aftermath of the COVID-19 pandemic’s economic disruptions, the Indian market has embarked on a remarkable recovery journey. This article delves into the nature of this resurgence, explores investor behavior, and examines the investment channels currently favored by Indian participants. A Post-Pandemic Bull Run The Indian market has witnessed a sustained uptrend since the second quarter of FY2022, marking a clear departure from the initial pandemic-induced downturn. This bull run, lasting for at least three years, signifies a robust recovery and renewed investor confidence. Investor Behavior: Responding to the Uptrend The market’s positive trajectory has influenced investor behavior. We’ve observed a surge in investor activity, with individuals actively seeking investment opportunities to capitalize on the growth potential. This shift reflects a growing risk appetite and a willingness to participate in the market’s upswing. Market Performance: Year Opening Closing %antage 2023-24 58,991.52 73,651.35 24.85 2022-23 58,568.51 58,991.52 0.72 2021-22 49,509.15 58,568.51 18.30 2021-22: This year marked a strong rebound for the Indian stock market after the initial shock of the COVID-19 pandemic. It delivered a return of 18.30%, indicating a significant bull run. 2022-23: The market performance in this year was more subdued compared to the previous year. It witnessed a flat return of around 0.7%, suggesting a period of consolidation or slight correction. 2023-24: The market regained momentum in this year, delivering a robust return of 24.85%. This signifies a continuation of the bull run that began in 2021-22. FY 2021-22 The year after covid, FY 2021-22 the following the gains were delivered by the market Index Opening Closing Return % Sensex 49,509.15 58,568.51 18.30 Nifty 50 14,690.70 17,102.55 16.42 Nifty Bank 33,303.90 36,373.60 9.22 Nifty Midcap 100 23,693.15 29,692.30 25.32 Nifty Small cap 100 8,113.15 10,436.25 28.63 Broader Market Performance It’s important to consider how the broader market performed beyond just the headline index. While you mentioned a point-to-point return, including specific details (e.g., percentage increase) would offer a more complete picture. Did all segments outperform the previous year, or were there any variations? Did smaller or mid-cap stocks outperform large-cap stocks, indicating broader market participation? Government Stimulus and Inflation Injections of money into the economy by governments worldwide likely played a significant role in the stock market’s initial rebound after the pandemic. However, such a stimulus can also contribute to inflation if not carefully managed. The observation about inflation not being felt in 2020-21 but rising in 2021-22 aligns with this notion. The effects of stimulus programs often take time to manifest, and the rising US inflation by year-end 2021 (at 8.5%) suggests a potential consequence of the earlier measures. The article above states how the US Fed reserve helped to create cash and help the country from going into recession (https://www.brookings.edu/articles/fed-response-to-covid19/). Which was invariably linked to high inflation in the countries. But there were many reasons why the inflation increased in the economy , As discussed the world over we are discussing a few reasons which caused the inflation All-in money printing totaled $13 trillion: $5.2 for COVID + $4.5 for quantitative easing + $3 for infrastructure. The money supply normally grows about 7% per year but quantitative easing (QE) of more than $4 trillion has increased money supply by 14% per year over the past decade. The $5 trillion in COVID relief increases the money supply by 27% and does so very quickly – the floodgates are open. Quantitative Easing did not bring inflation as measured by the Consumer Price Index (CPI), so that experiment has been declared a success, but the reality is that QE did inflate stock and bond prices, so there was inflation but not in the usual metric. By contrast, much of the COVID relief money will go directly into the hands of the consumer, so CPI will increase. Supply Side bans imposed on China by the US on manufacturing of Semiconductor , led to rising commodity prices, while at the same time caused a serious disruption of the world’s supply chain. There were the shipping snarls and bottleneck in global supply chain industry caused by Covid-19, worker shortages , the labor market tightened during 2021 and 2022, core inflation rose as the ratio of job vacancies to unemployment increased, The spikes in energy and food prices caused by the invasion of Ukraine Russia The multiple reasons stated above lead to inflation. Inflation started increasing after the first quarter of the financial year in the world. First of all it was thought to be transient in nature due to shipping bottlenecks which were created , towards the latter part of the year the other issues also caught up. Towards the end of this year the inflation has reached its highest levels and even the major conflict dented the sentiments which caused markets to close at level lower in the last few months. FII Equity inflow But we see that during the year the FII were net sellers throughout the year, and toward the end of the year the maximum outflow happened. The selling pressure further intensified as the oil prices increased towards the year end as war signals intensified. So even with the high selling from FII, the DII continued buying throughout. And the market was supported by the heavy DII and retail buying. So the question that we need to answer in context of Indian market for the year 2021-22 Why did FII were net sellers in the Indian Market ? One reason was tapering in the US market – It was only in the November 2021 meeting that the Fed took a decision and began reducing the monthly pace of its Treasury purchases by $10 billion and its MBS purchases by $5 billion in November and December. The Fed doubled the pace of tapering at its December 2021 meeting, and Fed Chair Jerome Powell confirmed in January 2022 that the plan is to end asset purchases in early March 2022. The Fed has made clear that tapering will precede any increase in its target for short-term interest
Fund Name Year Of inception Fund rating ( Crisil rated ) Portfolio Size ( In Cr ) Expense ratio PE ratios Exit Load ITI Mid Cap Fund Reg (G) 2021 5 1,085.02 2.13% 25.50 1% for redemption within 1 year Motilal Oswal Midcap Fund Reg 2014 5 14,445.55 1.66% 57.08 1% for redemption within 1 year HDFC Mid Cap Opportunities Fund 2007 4 75,382.3 1.39% 23.55 1% for redemption within 1 year Nippon India Growth Fund 1995 4 32,970.78 1.59% 30.36 1% for redemption within 30 days Edelweiss Mid Cap Fund 2007 4 6994.17 1.75 33.31 1% for redemption within 90 days SBI Magnum MidCap Fund Reg (G) 2005 3 21,127.45 1.66 40.57 1% for redemption within 1 year HSBC Midcap Fund Reg (G) 2004 3 11,882.09 1.72 37.31 For units in excess of 10% of the investment, 1% will be charged for redemption within 365 days Quant MidCap Fund 2008 3 9,282.92 1.73% 31.19 0.5% for redemption within 90 days Kotak Emerging Equity (G) 2007 3 50,601.84 1.42 30.57 For units in excess of 10% of the investment, 1% will be charged for redemption within 365 days Axis Mid cap fund(G) 2011 2 30,854.63 1.57 35.59 For units in excess of 10% of the investment, 1% will be charged for redemption within 365 days PGIM India Mid Cap Opp Fund Reg (G) 2013 1 11,216.06 1.7% 41.54 0.5% for redemption within 90 days ITI Mid Cap Fund Reg: The fund is currently 5 star rated , and has a very high expense ratio of 2.13% with low portfolio size 1,085 cr. The fund is a very recent entry in th category in 2021. Current PE of the fund is 25.50. MotilalOswal Mid cap fund: Crisil has rated this 2014 launched fund as 5 star. The fund has a decent size of 14,445 cr with an expense ratio of 1.66%. It has the highest PE among the funds considered. HDFC Mid Cap Opportunities Fund : The fund was launched in 2007, Currently rated as 4 star by CRISIL. This is the biggest fund in the category at 75,382 cr. The lowest expense ratio of 1.39%. The fund has PE 23.55 inline with the category. Nippon India Growth Fund : This is one of the oldest funds in the category 1995. Currently rated by CRISIL as 4 star. The fund is 3rd highest fund size in the category with 32,970 cr. The expense ratio is decent with 1.59%. PE is bit high with 30.36 Edelweiss Mid Cap Fund : The fund was launched in 2007. CRISIL has rated it as a 4 star fund. FUnd size small at 6994.17cr. So the expense ratio is high at 1.75%. The fund PE is 33.31 a bit high. SBI Magnum MidCap Fund: The fund was launched in 2005, Currently CRISIL rated 3. A decent fund size of about 21,127 cr. With expense ratio of 1.66. Fund PE of 40.57 is a bit high. HSBC Midcap Fund : The fund was launched in 2004, CRISIL rated as 3. Portfolio size of 11,882.09 cr with expense a bit high of 1.72%. PE is high on 37.31. Quant MidCap Fund: The fund was launched in 2008, it was run by escorts mutual fund under the name of escort opportunities fund. It was changed to quant AMC took over the business of escorts , in 2018. The fund size is small 9,282 cr. With a high expense ratio of 1.73%. Currently CRISIL is rated as 3 star. The fund has a bit high PE of 31.19 Kotak Emerging Equity : The fund was launched in 2007. Currency CRISIL rated as 3 star. The fund is Second largest fund size of Rs 50,601,84 cr. Low expense Ratio 1.42. Current PE of 30.57. Axis Mid cap fund Fund: The fund was launched in the year 2011. Currently CRISIL is rated as 2. This is the 4th largest fund size in the category with a size of 30,854.63. The Fund has a high PE of 35.59. PGIM Mid cap fund Fund: The fund was launched in the year 2013, CRISIL rated as 1, The fund size is low at 11,216 cr. High expense ratio 1.7%. High PE of 41.54 Trailing Returns : Scheme 1 month 3 months 6 months 1 year 3 years 5 years 7 years 10 years 15 years 20 years Axis Midcap Fund (G) 7.18 11 27.29 44.72 18.62 26.54 20.6 18.09 Edelweiss Mid Cap Fund Reg (G) 9.08 15.29 28.84 57.53 26.95 32.74 21.34 20.71 21.23 HDFC Mid Cap Opportunities Fund (G) 4.89 10.98 20.1 46.64 29.04 31.24 20.04 19.68 21.53 HSBC Midcap Fund Reg (G) 7.21 10.47 24.22 56.55 23.96 27.21 16.52 18.67 18.75 19.56 ITI Mid Cap Fund Reg (G) 5.55 7.88 24.81 62.87 24.46 Kotak Emerging Equity (G) 7.25 12.95 29.65 47.54 24.16 30.6 20.19 20.62 19.91 Motilal Oswal Midcap Fund Reg (G) 7.15 21.07 33.24 61.92 37.28 34.58 22.26 21.35 Nippon India Growth Fund (G) 5.93 12.25 25.84 51.06 27.46 32.12 21.29 19.57 17.6 21.44 PGIM India Mid Cap Opp Fund Reg (G) 6.4 12.5 20.71 33.35 16.2 32.56 19.51 17.26 Quant MidCap Fund (G) 2.34 0.52 13.91 51.46 29.7 37.15 24.75 20.2 16.31 14.24 SBI Magnum MidCap Fund Reg (G) 6.08 10.81 20.98 36.09 23.07 30.08 17.97 18.04 18.21 1 year trailing 1st quartile : 55.5- 63%: ITI Mid Cap Fund Reg (G), Edelweiss Mid Cap Fund Reg (G), HSBC Midcap Fund Reg (G), Motilal Oswal Midcap Fund Reg (G) 2rd quartile : 48- 55.5% : Nippon India Growth Fund (G), Quant MidCap Fund (G) 3rd quartile : 40.5- 48% : HDFC Mid Cap Opportunities Fund (G), Kotak Emerging Equity (G), Axis Midcap Fund (G) 4th quartile : 33- 40.5 % : PGIM India Mid Cap Opp Fund Reg (G), SBI Magnum MidCap Fund Reg (G) 3 years trailing return 1st quartile : 32.5-38 %: Motilal Oswal Midcap Fund Reg (G) 2rd quartile : 27%- 32.5%: HDFC Mid Cap Opportunities Fund , Nippon India Growth Fund (G),Quant MidCap Fund (G) 3rd
Section 54F of the Income Tax Act, 1961 provides a welcome tax break for 1. Individuals and 2. Hindu Undivided Families (HUFs) looking to invest the profits from selling long-term capital assets into a new residential property. Let’s delve deeper into the conditions and benefits of this section. Capital Gains Eligible for Exemption: This section applies specifically to long-term capital gains, which arise when you sell a capital asset other than a house property and have held it for more than two years. Common examples include Mutual funds, stocks, bonds, gold, jewellery, and even certain types of business assets. By reinvesting the proceeds from these sales into a new residential property, you can potentially offset the capital gains tax liability. Investment Requirements and Timeframes: To claim the full exemption, the taxpayer must invest the entire net sale proceeds from the original capital asset into the new residential property. The Act offers some flexibility regarding the timing of this investment: Purchase: The rule is clear: You can purchase the new house within one year before or two years after selling the original asset. Construction: If the taxpayer intends to build a new residence, construction must be completed within three years from the date of sale. Partial Exemption and Other Considerations: If you’re unable to reinvest the entire capital gains amount into the new property, the exemption is available proportionately. For instance, if you invest only 70% of the proceeds, you’ll receive a tax exemption on 70% of the capital gains. It’s important to remember that you shouldn’t own more than one residential house at the time you sell the original asset to claim the exemption under Section 54F. Additionally, selling the newly acquired house within three years of purchase can lead to a reversal of the exemption. The capital gains from that sale would then be taxed. Maximizing the Benefit of Section 54F: Given the intricacies involved, consulting a tax advisor is highly recommended. They can assess your specific situation, ensure you meet all the eligibility requirements, and help you strategise the investment process to maximize the tax benefit offered by Section 54F. By carefully planning your investment and adhering to the timelines, you can significantly reduce your tax burden while making a significant investment in a new residential property. Saving on taxes is half the battle. The other half is living on less than you make
Rating : 2 star Fund size : 7332.91 cr Expense ratio : 1.72% , seems a bit higher Trailing Returns Based on the past returns we see that it has been giving good returns Rolling Returns Rolling returns show that for around 77% of times the fund has given returns more than 12 % and around 50% of times returns more than 15 % for a rolling period of 5 years. Which is a normal result. It is to be observed that the fund has never given negative returns in 5 years period. The average returns is also decent for the fund at 14% Benchmark return : The fund is benchmarked against S&P BSE 500 TRI. The fund started with weak performance but had recovered since then. And has been above the benchmark for all these years. Vs Other ELSS fund : When we see the performance compared with other funds we see that the fund is not performing as compared Ratios The fund has std. deviation of 12.46 which shows the returns are stable, the beta is high of 0.91 but the fund has not been able to deliver any alpha, which is negative. The Sortino ratio which shows how much the downside the fund can protect is not good. Fund manager : The fund had a lot of changes in fund manager till 2020 , which may have caused a lot of trouble for the fund. The new fund manager seems to be loaded with a lot of funds to manage . Only Vishal Mishra even though new is trying to manage the fund. But his fund performance is still below the benchmarks. Fund strategy and fund style : Fund is growth oriented fund with fair orientation to large caps , limited allocation to id cap and very small allocation to small. So it may be one reason that it has underperformed the other ELSS funds in the market. This is the reason for the fund to be much more stable. The sector allocation of the fund is aligned with the benchmark to financial , technology and Automobiles. Conclusion The fund has some stable results and can be part of portfolio if you do not want to take much risk in your portfolio. But still better ELSS fund are available in the market.
Ben Graham the inventor of the phrase “margin of safety” defined investment as “ An investment operation is one which, upon thorough analysis, promises safety of principle and satisfactory returns. Operations Not meet these requirements are speculative” Investing can be an exciting journey that allows you to grow your wealth and achieve your financial goals. But before you dive in, it’s essential to equip yourself with a solid understanding of core investment principles. These fundamental concepts provide a roadmap for navigating the financial markets, making informed decisions, and building a successful investment portfolio. Whether you’re a seasoned investor or just starting out, a grasp of these core principles empowers you to take control of your financial future and make smart choices with your hard-earned money The fundamentals are very easy to grasp and may work as a guiding principle for anybody investing. They do not change for your Mutual fund investing too. Assigning goals: Every investment you make should be tied to a specific financial goal. This goal could be as simple as growing your money by a certain percentage over time, or it could be something more substantial like buying a house, funding your children’s education, or securing a comfortable retirement. Risk : Understanding your risk tolerance is crucial before investing. Mismatching your risk profile with an investment’s risk level can lead to a negative experience. Imagine a conservative investor placed in a small-cap fund, like the Nippon Small Cap Fund, which experienced a significant downturn of -36.19%. This could cause them considerable anxiety and potentially derail their investment plans. Conversely, an aggressive investor stuck in an equity-saving fund during a strong market might feel frustrated watching others earn higher returns . Horizon : Time horizon in investing refers to the amount of time you plan to hold onto an investment before you need to access the money. It’s a crucial factor in determining your investment strategy and risk tolerance Common Time Horizons: Short-Term (0-3 years): Focuses on preserving capital with minimal risk. Examples include savings accounts, money market funds, and short-term bonds. Medium-Term (3-10 years): Aims for a balance between growth and stability. Examples include balanced funds, index funds, and some corporate bonds. Long-Term (10+ years): Prioritizes long-term growth with the ability to handle volatility. Examples include growth stock funds, small-cap funds, and real estate investments. Current asset allocation: Having your asset allocation analyzed is a critical step in successful investing. This process helps you understand the current makeup of your portfolio and how different assets within it have historically behaved. By analyzing your asset allocation, you can identify any areas where you might be overweight or underweight in certain asset classes. This knowledge empowers you to make informed decisions and potentially adjust your portfolio to better align with your risk tolerance and financial goals( i have written about the concept in my blog https://wealthinn.in/asset-allocation-guideline-for-investment/) Diversification : Diversification in investing is a fundamental strategy that involves spreading your investments across various asset classes, industries, and even geographical locations. The core principle is to avoid putting all your eggs in one basket. By diversifying, you aim to reduce the overall risk of your portfolio without sacrificing potential returns. Asset allocation tends to take care of your diversification needs Emergency planning : Building an emergency fund is a crucial principle of sound financial planning. It’s a safety net that can cover unexpected expenses, such as job loss, medical bills, or car repairs. Aim to save 6-12 months of your living expenses in this fund. This amount can be adjusted based on your circumstances. For example, if you have a steady job and good health insurance, you might target 6 months. Conversely, if you’re self-employed or have high healthcare costs, consider saving closer to 12 months. You can store your emergency fund in a highly liquid account like a Fixed deposit account or a money market fund. Remember to regularly review and adjust your emergency fund as your income and expenses change. Insurance planning : Insurance planning is the process of strategically choosing insurance policies to financially protect yourself, your loved ones, and your assets in case of unforeseen events. It’s about identifying potential risks and finding insurance plans that can mitigate the financial burden they might cause. You should at least run one term plan and one health insurance policy apart from your corporate policy if you are salaried . These profiles prepare you and arm you with necessary steps to investment, i always say that products are last to be selected. Once the profile is clear things are done we can move to look into the products and select the products as per the guidelines given below Past performance : Past performance is a tricky concept in investing. While it can provide some insights, it’s not a guaranteed predictor of future results. But we do need to check how the funds are performing as compared to other funds in the category. Rolling returns : Rolling returns are a valuable tool for investors looking to understand the historical performance of an investment over various holding periods. Unlike traditional point-to-point returns, which show the change in price from one specific date to another, rolling returns provide a more nuanced picture. Benefits of Rolling Returns: Provides a Smoother Picture: Rolling returns smooth out short-term fluctuations, offering a better understanding of how an investment performs over different holding periods. Helps Analyze Risk: By analyzing rolling returns across various holding periods, you can gain insights into the investment’s potential volatility and risk profile. Informs Investment Decisions: Understanding how an investment has performed for different holding periods can help you make informed decisions about your own investment horizon and risk tolerance. Ratios : Mutual fund ratios are like little keyholes that give you a glimpse into the inner workings of a fund. They offer valuable insights into a fund’s performance, cost structure, and risk profile. Here are some key ratios to understand: Expense Ratio: This is the annual fee a fund charges investors to
Most firms have set up a war room to triage their immediate response to the crisis. But the lack of visibility around future demand complicates efforts to restart stalled portfolio companies…