Ever wondered how to invest in government securities directly without any intermediary? In this blog, we’ll uncover how you can do this at no cost with a platform launched by India’s central bank.
Retail Direct Platform
The Reserve Bank of India (RBI) launched an online platform in October 2021, the RBI Retail Direct Platform. The objective of this platform is to simplify access to government securities for retail investors who earlier invested in G-secs through intermediaries such as banks or brokers.
This scheme allows retail investors to open a Gilt Securities Account – Retail Direct Gilt (RDG). RDG account will allow investors to buy or bid government securities directly in the primary market as well as buy or sell in the secondary market.
Government securities can be a good long-term investment option for retail investors. They are considered the safest instruments as they are backed by the sovereign guarantee.
Any individual who is a natural person with a domestic savings account, a PAN card (permanent account number), any officially valid document for KYC such as aadhar card, a valid email ID, and a registered mobile number can open an RDG account.
Using the RBI Retail Direct Platform, the investor can invest in the following Government Securities:
Government of India Treasury Bills (T-Bills) – Treasury bills are short-term money market debt instruments. The RBI issues the T-bills in India. Currently, T-bills are available in three maturities – 91 days, 182 days, and 364 days.
Government of India dated securities (Dated G-secs) – Dated Government securities are a type of bond issued by the government of India. These are debt instruments and maturity of these securities ranges from 5 years to 40 years. The coupon or say interest rate on these securities can be either fixed or floating. There are multiple types of Dated securities: floating rate bonds, fixed rate bonds, zero coupon bonds, inflation indexed bonds, etc.
State Development Loans (SDLs) – SDLs are dated securities. State governments issue these securities to fund their deficit. SDLs are generally issued for 10 years and Investor receives the interest half-yearly.
Sovereign Gold Bonds (SGBs) – The RBI issues the SGBs on behalf of the govt. of India. They are denominated in grams of gold. SGBs are alternatives for digital or physical gold. The SGBs will be redeemed on maturity in cash and have a lock-in period of 8 years. Further, apart from capital gains from the increase in gold prices, investors also receive 2.5% interest p.a. on the bond amount.
Dated G-secs, SDLs, and T-Bills are issued in the primary market through auctions executed by the Reserve Bank of India (RBI). An investor, depending upon eligibility, can bid in an auction under Competitive Bidding or Non-Competitive Bidding.
Features / Benefits of Retail Direct Platform
Easy Access – Investors can easily access and buy/sell Government securities such as treasury bills, Government of India bonds, etc. through the platform.
Simple to Use – The platform is user-friendly, making it easy for even first-time investors to invest in Government securities.
Higher Returns – Investors can earn good interest by investing in G-secs through RBI Retail direct platform. SDLs and other long term G-secs generally provide better returns than regular bank FDs.
No Transaction Fees – The platform does not charge any transaction fee for your investments as there is no intermediary. Further, there is no account opening fee.
Safe & Secure – RDG is an RBI-backed platform that is completely safe and secure to use.
How to open RDG (Retail Direct Gilt account)
One can easily open an RDG account by following a few simple steps:
Visit the website and register using the registration link to open an account.
Enter the details asked such as your name, PAN number, e-mail, address, etc. After that, authentication of mobile number and email address using OTP.
After completing above steps, KYC verification is needed to be done.
Once the KYC is complete, choose your nominee as it is mandatory to fill the Nominee details. And you’re done!
Maximum and Minimum Investment Amount
The are minimum and maximum limits in investing via the RBI Retail Direct platform. The maximum and minimum Investment amount through Retail Direct Platform is as follows:
Security
Minimum Investment Amount
Maximum Investment Amount
T-Bills
INR 10,000.
The allocation of all non-competitive* bids will be limited to 5% of the total nominal amount of the issue.
Government of India dated securities
INR 10,000.
INR 2 crore per security per auction.
State Developments Loans (SDLs)
INR 10,000.
1% of the total amount per auction.
Sovereign Gold Bonds (SGBs)
One gram of gold.
Upto 4 kgs of gold.
Source: Reserve Bank of India
*Non-competitive bid in Government securities means a bid that is offered to a retail investor at a discounted rate by the RBI.
Limitations of Investing in RDG
Compared to other investment platforms, RBI Retail Direct primarily focuses on government securities and lacks diversification. Further, there are limited short term investment options available as most govt. issued securities are of long term maturity.
The minimum investment amount is INR 10,000, which can be high for individual investors.
The platform relies on self-directed research and lacks comprehensive research tools.
Government securities carry various market-related risks such as interest rate risk, i.e., an investor can generate lower or higher returns due to fluctuations in interest prices if they sell their investment before the maturity. However, the credit risk, i.e., loss of capital is almost nil in the govt. securities.
The RBI Retail Direct Platform is a great initiative by the RBI to promote the inclusion of government securities in the portfolio of a retail investor. It is a safe and secure platform for investors looking for a investment option to directly invest in various government securities without any intermediary.
Frequently Asked Questions (FAQ)
What is the full form of the RDG scheme?
RDG stands for Retail Direct Gilt Scheme.
Mention the government securities an investor can invest in using the RDG scheme.
Treasury Bills, Dated G-secs, State Development Loans (SDLs), etc.
What is the minimum investment amount in T-bills?
The minimum investment amount in T-bills is INR 10,000.
Are govt. securities 100% safe?
No, Govt. securities are not 100% safe; there are various market related risks such as interest rate risk if you sell your investment before maturity.
India is a growing country that has witnessed an increase in investment activities and a growing number of investors. Assets under Management (AUM) of Mutual Funds is growing by double digits, and demat accounts in India crossed the ten crore mark. The tale of India is being told by these metrics.
In this blog, we delve into the portfolios of some of the top investors of India.
1. Radhakishan Damani
Radhakishan Damani is a well-recognized name in the investment world. Damani is an entrepreneur and is the founder of a well-known retail chain in India, D-Mart. He is recognized for his eccentric approach to the stock market. He manages his portfolio through his investment firm, Bright Star Investments Limited. According to Forbes, he is the 8th richest person in India.
Damani was born in Mumbai on 15 March 1954 in a Marwari Hindu family. He studied Commerce at the University of Bombay but dropped out after one year. After the death of his father, he tried his hands in the stock market in the year 1980, and became a broker and investor. He made profits by short-selling the stocks in the 90s.
Investment Philosophy
Damani is a value investor and focuses on long-term investments. He is often associated with a conservative and risk-averse investment style and, invests in undervalued companies with strong fundamentals and has a good track record of consistently outstanding performance. He conducts his research to choose the stock and is patient with his investment strategies during market fluctuations.
Radhakishan Damani’s Portfolio
As of September 2024, his portfolio valuation stood at INR 182,559 Crs. The table below shows the top ten stocks from his portfolio:
Stocks
Value (IN cr)
Avenue Supermart Ltd.
160909.07
Trent ltd
3067.4
VST industries Ltd
1609.2
Other
2270.7
2. Rakesh Jhunjhunwala
Rakesh Jhunjhunwala, also known as the Big Bull and the ‘Warren Buffet’ of the Indian stock market. He was a chartered accountant and a famous equity investor in India and one of India’s richest people. He was born in Mumbai, on July 5, 1960. Jhunjhunwala died on August 14, 2022, because of an adverse medical condition.
Rakesh developed an interest in stocks when he observed his father discussing stocks with his friends. Rakesh started his career in the stock market in 1985 with an investment of INR 5,000. Investments in companies like Titan, Infosys & CRISIL in 2000 brought him early success.
Rakesh Jhunjhunwala’s Investment Philosophy
Rakesh was recognized for his value-investing approach in the stock market. He had always chosen undervalued companies with strong fundamentals in the market. He believed that these companies hold an immense potential to generate great returns over the long term. Rakesh invested in companies across different sectors to maximize his returns and was always focused on extensive research of stocks.
Rakesh Jhunjhunwala Portfolio
As of September 2024, Jhunjhunwala’s net worth stood at INR 51,079 Crore. Have a look at the sector-wise breakup of Rakesh Jhunjhunwala’s portfolio.
Further, have a look at the top stocks of his portfolio:
Stocks
Value (IN cr)
Titan Company ltd
15,169
Concord Biotech Ltd.
5,526.40
Star Health and Allied Insurance Company Ltd.
4,789.80
Tata Motors Ltd.
3,804.20
Metro Brands Ltd.
3,260.20
Others
18349.6
3. Mukul Agarwal
Mukul Agarwal, as an investor has gained prominence in recent years. Currently, he is the director of three companies, namely Param Capital Research Private Limited, Permanent Technologies Private Limited, and Mahavir Prasad Nevatia Education Institution. He entered the market in the late 90s.
Mukul Agarwal’s Investment Philosophy
Mukul is the fresh face of the Indian stock market. He adopts a long-term investment strategy with a major focus on diversification of portfolio. He does not believe in making impulsive decisions and knows how to stay disciplined while investing.
Mukul Agarwal’s Portfolio
As of September 2024, Mukul Agarwal’s net worth stood at INR 7189.8 Crore. Have a look at the top ten stocks from his portfolio:
Stocks
Holding value (INR CR)
BSE Ltd
912
Neuland Laboratories Ltd.
676.7
Nuvama Wealth Management Ltd.
335
Radico Khaitan Ltd.
329.6
Capacit’e Infraprojects Ltd.
229.5
Others
4725
4. Azim Premji
Azim Premji is a philanthropist, business tycoon, and the former chairman of one of the leading tech giants of India, Wipro Limited. Azim Premji was born in Mumbai in the year 1945. Premji holds a bachelor’s degree in electrical engineering from Stanford University He took over Wipro from his father in the year 1966. At that time, Wipro was a vegetable oil company. Premji later recognised the emerging IT trends in the country and decided to expand Wipro’s Business. As a philanthropist, he has donated over $21 billion to his Azim Premji Foundation. Premji has been awarded with Padma Bhushan in the year 2011. Wipro made Premji one of the wealthiest investors in India.
Azim Premji’s Investment Philosophy
Premji is known for his disciplined and long-term investment strategies. He has a long-term perspective on the stock market. Premji focuses on value investing principles and thoroughly analyses the company’s fundamentals and growth potential. He believes in diversification of portfolio and knows how to manage risk effectively.
Azim Premji’s Portfolio
As of September 2024, Premji’s net worth stood at INR 110901.3 Crore. Have a look at the sector-wise breakup of Azim Premji’s portfolio:
The table below shows the top stocks from his portfolio:
Stocks
Holding Value (INr cr)
Wipro
110901.3
5. Ashish Dhawan
Ashish Dhawan is a well-known investor in India who has achieved significant returns in the stock market through his analytical approach. Ashish was born on March 10, 1969. He is the co-founder of Chrys Capital, a leading private equity firm.
After a successful career in investing, he switched to philanthropy and education. Dhawan is also the founder of a non-profit organization named Central Square Foundation which works towards improving and transforming the quality of education. He also played a major role in the establishment of Ashoka University in Haryana.
Ashish Dhwan’s Investment Philosophy
Ashish spreads his investments across various sectors and asset classes to minimize risk. He emphasizes long-term returns and conducts detailed analyses of market conditions, and companies before investing. He looks for undervalued gems in the stock market.
Ashish Dhawan’s Portfolio
As of September 2024, Dhawa’s net worth stood at INR 3,332.7 Crore. Have a look at the top ten stocks from his portfolio:
Stocks
Holding Value(inr cr)
Glenmark Pharmaceuticals Ltd.
1,126
Quess Corp Ltd.
417.6
Mahindra & Mahindra Financial Services Ltd.
416.9
AGI Greenpac Ltd.
332.9
Greenlam Industries Ltd.
283.1
Others
771.4
6. Vijay Kishanlal Kedia
Vijay Kedia’s portfolio is among the most followed in the Indian market, both due to his reputation as a “market master” and the historical returns his portfolio has delivered over the years Born on 1959 in Kolkata, Kedia has made a name for himself as a self-made investor who started his journey in the stock market at a young age, overcoming significant financial challenges to establish himself as one of India’s most respected market voices.
Kedia has been a keynote speaker at IIM Ahmedabad, IIM Bangalore & MDI Murshidabad and he has been a TEDx speaker 2 times He was also invited to speak at London Business
Vijay Kedia’s Investment Philosophy
Speaking about his investment rationale, Kedia says, “One should scout for companies which have good management. Find very good, very honest management and see the product in which the management is going to outperform its peers and the economy. Invest in those companies for the next 10-15 years, and you cannot go wrong.” He uses the SMILE approach in his portfolio investments – ‘small in size, medium in experience, large in aspiration, and extra-large in market potential’.
Vijay Kedia’s Portfolio
As of September 2024, Vijay’s net worth stood at INR 1928.2 Crore. Have a look at the top ten stocks from his portfolio:
Stocks
Holding Value(INR CR)
Tejas Network Ltd
431
Atul Auto Ltd.
362.6
Neuland Laboratories Ltd.
221.7
Elecon Engineering Company Ltd.
179.6
TAC Infosec Ltd.
117.8
Others
621
7. Ashish Kochalia
Ashish Kacholia is a prominent Indian stock market investor renowned for his astute investment strategies and knack for selecting multi-bagger stocks that deliver exceptional returns over the long term.
Often referred to as the “Big Whale” of the Indian equity markets, Kacholia has built a formidable reputation for his deep research With a career that spans decades, Kacholia initially co-founded the renowned brokerage firm Edelweiss, which laid the foundation for his extensive understanding of market dynamics. Over time, he transitioned to become an independent investor, amassing a well-diversified portfolio across sectors such as technology, consumer goods, chemicals, and manufacturing.
Ashish Kacholia’s success has made him a sought-after figure in the financial world, where he is often lauded as an inspiration for retail investors looking to build wealth in equity markets. Despite his success, he maintains a low public profile, letting his impressive track record and investment philosophy speak volumes.
Ashish Kochalia’s Investment Philosophy
His investment style is characterized by patience, a focus on business fundamentals, and a deep conviction in the companies he invests in. He identified high-growth potential in small-cap and mid-cap companies and remain invested in them for a long time which delivers exceptional returns
Ashish Kochalia’s Portfolio
As of September 2024 Ashish Kochalia’s net worth stood at INR 3,158.7 Crore. Have a look at the top stocks from his portfolio:
Stocks
Holding Value(INR Cr)
Shailey Engineering Plastics ltd
361.2 Cr
Beta Drugs Ltd.
267.4 Cr
Safari Industries (India) Ltd.
238.6 Cr
Awfis Space Solutions Ltd
234.3 Cr
Others
2057.3
8. Madhusudan Kela
Madhusudhan Kela is a renowned Indian investor and financial strategist celebrated for his deep insights into equity markets and a career spanning over three decades. He gained prominence during his tenure as Chief Investment Strategist at Reliance Mutual Fund, where his visionary investment strategies played a pivotal role in delivering outstanding returns and building a robust reputation for the fund.
Madhusudhan Kela’s Investment Philosophy
Kela’s investment philosophy is rooted in the principles of identifying long-term trends, deeply analyzing business fundamentals, and maintaining a high conviction in his bets. Known for his contrarian approach, he often seeks opportunities in undervalued or overlooked sectors, emphasizing patience and the ability to withstand market volatility. His disciplined, research-driven methodology and knack for spotting multibagger opportunities have made him a revered figure in Indian capital markets.
Madhusdhan’s Kela Portfolio
As of September 2024, Madhusudhan Kela’s net worth stood at INR 2,224.0 Crore. Have a look at the top stocks from his portfolio:
Stocks
Holding Value(Rs cr)
Choice International ltd
1,278
Mk Ventures Capital Ltd.
489.90
Sangam (India) Ltd.
93.00
Bombay Dyeing & Manufacturing Company Ltd.
73.70
Samhi Hotels Ltd.
70.40
Others
218.8
9. Akash Bhansali
Akash Bhansali is a prominent Indian investor and the Managing Director of Enam Holdings, a private investment firm renowned for its strategic investments across diverse sectors. With decades of experience in the financial markets, Bhansali has earned a reputation as a sharp and forward-thinking investor who focuses on creating long-term wealth through disciplined and well-researched investments. His ability to identify trends early and align his portfolio with India’s growth story has made him a respected figure in the investment community.
Akash Bhansali’s Investment Philosophy
Bhansali’s investment philosophy revolves around identifying quality businesses with robust fundamentals, strong management teams, and scalable growth opportunities. He emphasizes patience, value creation, and a deep understanding of the industries he invests in. His portfolio often reflects a balance between traditional industries and emerging sectors, showcasing his belief in diversification and adaptability. Akash Bhansali’s strategic and thoughtful approach serves as an inspiration for investors aiming to achieve sustainable wealth creation.
Akash Bhansali’s Portfolio
As of September 2024, Vijay’s net worth stood at INR 6952.7 Crore. Have a look at the top stocks from his portfolio:
Stocks
Holding Value(Rs cr)
Gujrat Fluorochemicals Ltd
2,137
One97 Communications Ltd.
717.1
Sudarshan Chemical Industries Ltd.
627
Inox Wind Energy Ltd.
497.5
Schneider Electric Infrastructure Ltd.
467.6
Other
2506.79
10. Anil Kumar Goel
Anil Kumar Goel is a highly regarded Indian investor known for his exceptional expertise in identifying high-potential opportunities in small-cap and mid-cap companies. With decades of experience in equity markets, Goel has carved out a niche for himself by focusing on undervalued and often overlooked sectors, particularly in the manufacturing and industrial space. He is also known as “Sugar Baron” on Dalal Street because of his picks in sugar stocks. His success has made him a well-respected figure among value investors in India.
Anil Kumar Goel’s Investment Philosophy
Goel’s investment philosophy centers around deep value investing, where he meticulously analyzes a company’s financials, business fundamentals, and industry prospects. He is known for his preference for companies with strong cash flows, minimal debt, and consistent growth potential. Goel often takes a long-term approach, patiently holding his investments as the value of the business unfolds over time. His ability to spot hidden gems and turn them into multibaggers has made him an inspiration for retail and institutional investors alike.
Anil Kumar Goel’s Portfolio
As of September 2024, Anil Kumar Goel’s net worth stood at INR 2164.2 Crore. Have a look at the top stocks from his portfolio:
Each investor that we have discussed, has their approach and areas of expertise, which makes India’s investment landscape remarkable. Every investor’s journey provides valuable insights and inspiration for aspiring investors.
To warp it up, there is no “best” way to invest in the stock market. One can observe by analysing the portfolio of top investors that long-term investing, discipline, and patience are the key factors to a successful investing journey. Create your strategies and uncover opportunities that might lead you to the ladder of success.
Frequently Asked Questions (FAQs)
Who played a major role in the foundation of Ashoka University?
Ashish Dhawan.
Who is known as the “Warren Buffet of India”?
Rakesh Jhunjhunwala
Who was the former chairman of Wipro?
Azim Premji
What is the investment style of Ashish Dhawan?
Ashish Dhawan focuses on long-term investing and picks undervalued stocks with strong fundamentals.
The Indian markets have performed exceptionally well in calendar year 2023. All major sectors are in green, and broader indices like Nifty 50 and Sensex gave more than 18% returns.
There were 234 IPOs launched in calendar year 2023, 176 SME, and 58 mainboard IPOs. In this blog, we will uncover the top IPOs launched in 2023 by listing gains.
What is an IPO?
If you’re not familiar, IPO stands for Initial Public Offering. When a company raises capital in the primary market by selling shares to the public, it is referred to as an IPO. An IPO is an imperative step in the growth of a business. Once listed on the Stock Exchanges (NSE & BSE), the shares of a company can be easily bought and sold.
Top IPOs of 2023
As stated above, a total of 234 IPOs launched in 2023 out of which mainboard included 58 IPOs and SME included 176 IPOs.
Mainboard IPOs are for large companies with a post-issue paid-up capital of at least INR 10 crore, whereas SME IPOs are for small and medium enterprises with a post-issue paid-up capital of a minimum of INR 1 crore and a maximum of INR 25 crore.
Tata Technologies IPO is a book-built issue of INR 3,042.51 crores. The issue was a complete offer for sale (OFS), i.e., the entire issue was sold by existing shareholders.
Tata Technologies was founded in the year 1994. It is a leading Indian multinational product engineering company known for its expertise in the automotive, aerospace, and industrial heavy machinery sectors. The company was incorporated as ‘Core Software Systems’ in the year 1989 as the automotive design unit of Tata Motors with a major focus on car designing and development and was later renamed Tata Technologies in the year 2001.
Tata Technologies shares were listed at a premium of 163% above the issue price. The opening price on the listing day was INR 1,200 per share. On the day of listing, the shares rallied 10% to close at INR 1313.
The shares of Tata Technologies are currently trading at INR 1,180 and are down almost 10% from the listed price of INR 1,313.
2. Motisons Jewellers
Motisons Jewellers IPO was a book-built issue of INR 151.09 Crore. The issue was a completely fresh issue of 2.75 Crore shares.
It was established in the year 1997. The company sells gold, diamond, and other jewellery products with over three lakh designs. The flagship store – Motisons Tower is located in Jaipur. The latest branch of Motisons was opened in 2021, in Vaishali Nagar, Jaipur.
Motisons Jewellers IPO Details
IPO Date: December 18, 2023 to December 20, 2023
Listing date: December 26, 2023
Price Band: ₹52 to ₹55 per share
No of shares offered: 25,829,700
Lot Size: 250 Shares
Performance Analysis
Shares of Motisons Jewellers were listed at a premium of 84% above the issue price. The company’s opening price on the listing day was INR 109 per share. However, on the listing day, the shares closed at INR 104.
As of 1 Jan 2024, the shares of Motisons Jewellers are trading around INR 103, which is close to the listing day’s price.
3. Netweb Technologies
Netweb Technologies India IPO is a book-built issue of INR 631 crores. The issue was a combination of a fresh issue of 0.41 crore shares and an offer for sale of 0.85 crore shares.
It is a producer of high-performance computing and data centre solutions. The company specialises in designing, developing, applying, and integrating HPC solutions for businesses and research organisations.
Newteb Technologies IPO Details
IPO Date: July 17, 2023 to July 19, 2023
Listing date: July 27, 2023
Price Band: ₹475 to ₹500 per share
No shares offered: 12,620,000 shares.
Lot Size: 30 Shares
Performance Analysis
Shares of Newteb Technologies India were listed at a premium of 82% above the issue price. The opening price price of the company on the listing day was INR 947 per share. However, on the listing day, the shares closed at a discount of nearly 4%, i.e., INR 910 after making a high of INR 953.
The shares of Newteb Technologies India are currently trading around INR 1,187 and are up nearly 25% from the listed price of INR 910.
4. Ideaforge Technology
Ideaforge Technology was a book-built issue of INR 567.29 Crore. The issue was the combination of a fresh issue of 0.36 crore shares and an offer for sale of 0.49 crore shares.
The company was founded and incorporated in the year 2007. The company is involved in the business of manufacturing Unnamed Aircraft Systems (UAS), also called drones. Ideaforge is a market leader and holds approximately 50% market share in the manufacturing of drones. The major focus of the company is on security and surveillance products.
Ideaforge IPO Details
IPO Date: June 26, 2023 to June 30, 2023
Listing date: July 7, 2023
Price Band: ₹638 to ₹672 per share
No of shares offered: 4,648,870 shares
Lot Size: 22 Shares
Performance Analysis
Shares of Ideaforge were listed at a premium of 93% above the issue price. The opening price of the company on listing day was INR 1,300 per share. However, the share price closed at a discount of nearly 1%, i.e., INR 1,295 after making a high of INR 1,344.
As of 1 Jan 2024, the shares of Ideaforge Technologies India are trading around INR 835 and are down nearly 35% from the listed price of INR 1,295.
5. DOMS Industries
DOMS IPO was a book-built issue of INR 1,200 crore. The issue was a combination of a fresh issue of 0.44 crore shares and an offer for sale of 1.08 crore.
The company is a leading Indian manufacturer and supplier of stationery and art products. It was started in the year 2005, and since then the company has achieved significant growth and brand recognition.
It offers a wide range of products such as drawing materials, gifting items, pens and geometrical instruments, paper materials, kits & combos, etc. The company has a strong distribution network in over 45 countries.
DOMS Industries IPO Details
IPO Date: December 13, 2023 to December 15, 2023
Listing date: December 20, 2023
Price Band: ₹750 to ₹790 per share
No shares offered: 15,126,581 shares
Lot Size: 18 Shares
Performance Analysis
Shares of DOMS Industries were listed at a premium of 68% above the issue price. The opening price of the company on the listing day was INR 1,400 per share. However, the shares closed at a discount of nearly 5%, i.e., INR 1,326 after making a high of INR 1,434.
As of 1 Jan 2024, the shares of DOMS Industries are currently trading around INR 1,250 and are down nearly 5% from the listed price of INR 1,326.
Apart from the above-mentioned IPOs, several other IPOs saw a stellar debut on the stock exchange. The list of other IPOs is as follows:
The IPO market of 2023 in India was marked by high volatility and uncertainty. While the number of listings remained strong, the overall performance of the IPOs was mixed, with some companies exceeding expectations and others falling short. It is important to understand that thorough research is necessary before investing in any IPO.
Offer Document or Prospectus, carries information about the company business, background, experience of the management team, company’s financial statements, etc.
If you are looking forward to beginning your journey in mutual funds and are not familiar with the term AMC or Asset Management Company, you have come across the right place!
What is AMC?
AMC stands for Asset Management Company. AMCs are financial institutions that manage and invest funds on their client’s behalf through pooled investments such as mutual funds, ETFs or other financial instruments.
AMC employs professionals fund managers, and analysts to make investment decisions. These professionals research and analyse the market conditions to fulfil the fund’s choices and investment needs.
And for all these services, they charge fees for managing the funds. The fees include a management fee, a performance fee and other miscellaneous expenses. The fees are the percentage of the assets under management (AUM) – It is the total value of the investments managed by the AMC.
In India, AMCs are regulated by the Securities & Exchange Board of India (SEBI). Further, AMCs are also passively regulated by the Association of Mutual Funds in India (AMFI).
Now, you must be thinking about how these AMCs operate. AMCs invest the pooled money in professionally managed funds based on the investor’s financial goal, investment horizon and risk appetite. They rebalance these funds on different frequencies, such as quarterly or annually to maintain the desired asset allocation.
AMCs distribute these funds through various channels including banks, online platforms, NBFCs, distribution houses, agents, etc. The revenue of an AMC primarily comes from the fees it charges from the investors.
Indian Mutual Fund Industry Analysis
Assets Under Management (AUM) of the Indian Mutual Fund Industry stood at INR 49.05 lakh crores as of 30 November 2023.
The AUM of the Indian Mutual Fund Industry has grown from ₹8.90 trillion as of 30 November 2013 to ₹49.05 trillion as of November 30, 2023, more than a 5-fold increase in 10 years.
The proportionate share of equity-oriented schemes is 54.9% and for debt-oriented schemes it is 18.5% of the industry’s assets. Individual investors hold a relatively higher share of industry’s assets, i.e., 59.2% in November 2023.
Institutional investors account for 40.8% of the assets, of which corporates are 95%. The rest are Indian and foreign institutions.
From the above data, we can interpret that AMCs have experienced steady growth over the years, reflecting investors’ participation in the mutual fund industry. Rise in disposable incomes and increasing financial awareness are key factors leading to the growth of the mutual fund industry in India.
Emerging Trends in the Indian Mutual Fund Industry
We all understand the financial landscape of India, which is continuously evolving and AMCs are launching new schemes every year. In the calendar year 2023, AMCs in India launched 198 New Fund Offers (NFOs).
Some of the key emerging trends in the mutual Fund industry are:
Fintech and Robo-advisors are playing an important role in managing investments. Robo-advisors use algorithms to provide automated suggestions on your investments are continuously gaining attention.
Investors these days generally look for investment opportunities that align with their values. Thematic and Overseas funds play a major role by providing sector-focused and global investments opportunities respectively.
ESG investing or environmental, social and governance factors are crucial for new-generation investors. AMCs that curate ESG-friendly funds are attracting ample inflows.
Direct investment platforms are gaining traction because of their low expense ratio and easy registration process.
Broadly, there are two types of mutual funds – direct funds and regular funds. Their expense ratio is the primary distinction between them. Regular mutual funds are chosen by investors who prefer investing with financial advisors, whereas Direct mutual funds are meant for those investors who make their own investment decisions.
Top Asset Management Companies of India
As of December 2023, there are 44 registered Asset Management Companies in India. The top 5 AMCs in India are:
1. SBI Asset Management Company
SBI mutual fund is a leading AMC in India. It was established in the year 1987 and has 36 years of experience in the fund management. It is a joint venture between the State Bank of India and Amundi Asset Management company. State Bank of India currently holds a 63% stake in the SBI mutual fund, and Amundi Asset Management company holds a 37% stake through a wholly owned subsidiary.
SBI currently manages 306 open-ended and 215 close-ended funds with an AUM of INR 828,152 crores as of September 2023.
2. ICICI Prudential Asset Management Company
ICICI is another major player in the Indian Mutual Fund Industry. It was established in 1998 and is a joint venture between ICICI Bank and Prudential Plc, a leading Pan-Asia & Africa-focused group that provides health protection and saving solutions.
ICICI AMC manages 436 open-ended and 17 close-ended funds with an AUM of INR 594,204 crores.
3. HDFC Asset Management Company
Established in the year 2000, HDFC is also a major player in the mutual fund industry with a strong track record and robust product portfolio.
HDFC AMC is a joint venture between HDFC Limited & ABRDN Investment Management Limited (formerly known as Standard Life Investments Limited).
HDFC AMC manages 277 open-ended and 57 close-ended funds with an AUM of INR 518,132 crores.
4. Kotak Asset Management Company
Kotak AMC is the wholly owned subsidiary of Kotak Mahindra Bank Ltd., which started operations in the year 1998 and holds a large investor base of over 8.1 million.
It currently manages 237 open-ended and 34 close-ended funds with an AUM of INR 330,703 crores.
5. Nippon Asset Management Company
Nippon India Mutual Fund (NIMF) is one of the fastest-growing mutual funds in India and was established in the year 1995. NIMF was previously known as Reliance Mutual Fund.
Nippon currently manages 441 open-ended and 24 close-ended funds with an AUM of INR 329,831 crores.
To wrap it up, there are 44 registered AMCs in India offering a diverse world of mutual funds. Remember, even though the Indian asset management industry is poised for consistent growth in the coming years, always conduct thorough research and analysis before starting your investment journey and consult with financial advisors.
Also, if you are a keen investor and want to update yourself on the taxation of different mutual funds in India, checkout our blog: Decoding Mutual Funds Taxation In India
Frequently Asked Questions (FAQs)
What is the full form of AMC?
Asset Management Company.
Does AMC charge fees from investors?
Yes.
Who regulates AMCs?
Securities & Exchange Board of India.
How many registered AMCs are there in India?
As of December 2023, there are 44 registered AMCs.
What is Assets Under Management (AUM)?
It is the total value of the investments managed by the AMC.
Hedge Funds are attractive, yet often misunderstood financial products. In our today’s blog, we will learn about these funds and understand what place they hold in the investment landscape.
What are Hedge Funds?
Hedge funds are investment funds that pool capital from high-net-worth individuals (HNIs) and institutional investors.
These funds are managed by professional fund managers and deploy capital in complex products and strategies like listed and unlisted derivatives, real estate, convertible debt, etc. They have the potential to deliver significant returns but also carry significant risks.
They play a significant role in portfolio diversification since they help in diversifying the portfolio and provide a chance to invest in complex strategies.
Hedge Funds in India
Hedge Funds are considered as Alternate Investment Funds (AIFs) in India. As per SEBI, “AIF is a privately pooled investment vehicle incorporated in India which collects funds from sophisticated investors, whether Indian or Foreign, for investing it in accordance with a defined investment policy for the benefit of its investors”.
There are three categories of AIFs classified by SEBI:
1. Category I AIF: Venture Capital Funds, Angel Fund, etc.
2. Category II AIF: Funds that do not fall in Category I and Category III.
3. Category III AIF: Hedge Funds
Hedge funds fall in Category 3 AIFs. These funds are not pass-through entities and are taxed at the fund level. In other words, tax will be paid by the fund, and investors are not required to pay tax. However, this is generally less tax efficient as compared to other investment options.
As per SEBI, there are 1,220 Alternative Investment Funds registered in India as of December 2023.
Features of Hedge Funds
1. Hedge Funds can be registered as a trust, company, or LLP. Generally, partnership structure consists of General Partners and Limited Partners.
General Partners (GPs): GPs actively manage the operations of the fund and also invest in it. They have unlimited liability.
Limited Partners (LPs): LPs are the investors that do not take participation in the management. Further, they have a limited liability.
2. Hedge funds employ a plethora of strategies, including long and short positions, arbitrage, derivatives trading, etc. although they are flexible and can also invest in equity, currency, and commodities.
3. Hedge funds try to generate alpha over benchmark returns, i.e., the main objective of hedge funds is to generate positive returns irrespective of the market conditions.
4. Hedge funds carry high charges & fees. These funds charge both management fees and a share of the investor’s profit.
5. Hedge Funds are generally targeted to sophisticated investors, i.e., HNIs, Institutional Investors, Family offices, etc. as the minimum investment amount is in crores. As per SEBI, the minimum amount to start investing in a Hedge fund is one crore, and the entire fund should have a corpus of at least INR 20 crs.
6. Hedge Funds are less regulated as and when compared to mutual funds. Periodic disclosures of NAVs of hedge funds to SEBI are not mandatory. Further, there is no requirement for these funds to register with the Securities and Exchange Board of India (SEBI).
7. Hedge funds have low liquidity, and investors may need to face lock-in periods. They can be open-ended or close-ended.
Hedge Funds Strategies:
Hedge Funds are generally classified by strategies. Such strategies change over time when new strategies are introduced in the market. There are four broader hedge fund strategies:
1. Equity Hedge – They focus on equity and equity related instruments. These funds focus on both long and short positions. Equity Hedge includes strategies such as Market Neutral, Fundamental Value, Sector specific, etc.
2. Event Driven – Event Driven strategies focus on generating profits from certain corporate actions. These include strategies like Merger Arbitrage, Special Situations, etc.
2. Relative Value – These funds capitalise on pricing differences in the market and try to generate profits from relative price movements. These include Volatility trading, Multi Strategy, Fixed Income, etc.
4. Macro Strategies: These funds follow a top-down approach to identify various macro events such as economic activities, interest rates, fluctuation in currencies, etc.
There are also Fund of Hedge Funds (FoHF), which are similar to Fund of Funds (FoF). These funds invest in a diversified portfolio of multiple hedge funds.
Fee Structure of Hedge Funds
Here is a breakdown of the fee structure:
1. Management Fees
Management fees range from 1-2% and are charged irrespective of the fund’s performance.
2. Performance Fees
Performance fees are a percentage of the fund’s profit and are generally around 20%
3. Hurdle Rate
It is a pre-decided minimum level of return that the fund needs to achieve before the performance fee is charged. It can be of multiple types: Soft hurdle, Hard hurdle, or Blended Hurdle.
Apart from these, hedge funds may charge transaction costs from investors. The above-mentioned fee structure can change depending on the type of hedge fund. It is suggested for the investors to carefully review and analyse the fee structure before investing.
Investors with low capital can also invest in mutual funds, whereas investments in hedge funds are allowed only for HNI and institutional investors as the minimum investment amount is in crores.
Mutual funds are subject to stricter regulations and disclosure requirements about investments as compared to hedge funds. Hedge funds are less regulated and riskier than mutual funds.
Mutual fund is suitable for investors who seek long-term growth and lesser risk and hedge funds are meant for investors who have a high-risk appetite.
Mutual funds do not charge any fees on profits earned by investors whereas, in the case of hedge funds, fund managers can ask for a share in the profits of the investors.
Benefits of Investing in Hedge Funds
Diversification: Hedge funds allow diversification that can reduce the overall risk of the portfolio. Hedge fund returns may not move in sync with stock or bond markets, potentially offering greater diversification and stability.
Returns: Hedge funds aim to generate good returns irrespective of the prevailing trends in the market.
Professionally Managed: They are professionally managed. Fund managers earn performance fees from the investors. This encourages them to strive for strong and better performance.
Demerits of Investing in Hedge Funds:
1. Not transparent: Hedge Funds operate in a less regulated world and are not obliged to issue performance reports, portfolio holdings, etc. Further, they are not allowed to advertise in India.
2. Not for all: As discussed above, hedge funds deploy capital in complex strategies and carry higher risk as compared to other investment options. Further, the minimum investment amount is generally in crores, whereas in other investment options like Mutual funds, you can invest from as low as INR 100.
3. Expensive: Hedge Funds are substantially more expensive than traditional investments and may not be tax efficient as compared to other investment options.
On a parting note, hedge funds appeal to investors who seek high returns from the financial markets. Even though they are not meant for every investor out there, these funds still hold a unique and powerful place in the financial world. Understanding their strengths, weaknesses, and proper due diligence is important for investors before considering them as an investment option.
Frequently Asked Questions (FAQs)
Can hedge funds advertise in India?
No, as per SEBI, AIFs are privately pooled investments that raise funds via private placement only.
Hedge Funds fall under which category of AIF
Hedge funds are Category III AIF.
What is the most common fee structure charged by hedge funds?
Most Hedge Funds follow 2 / 20 structure means a 2% management fee and 20% performance fee.
Is NAV disclosure mandatory for hedge funds?
No, NAV disclosure is not mandatory for hedge funds.
Are Hedge funds more regulated than mutual funds?
No, hedge funds are comparatively less regulated than mutual funds.
Tired of investing in FDs, and looking for another option to invest?
FDs are the most preferred choice for risk-averse investors in India. They are convenient, simple to understand, and safe….wait, are they really safe? It may or may not.
After the recent fiasco of Yes Bank and PMC Bank, it can be understood that FDs are not 100% safe. Further, there are a few drawbacks, such as penalty for premature withdrawal, not so-flexible tenure, etc.
What is the safest investment then? What are the other options that provide more flexibility or tax efficiency than Fixed Deposits? In this blog, we will explore answers to all such questions.
Alternatives to FDs
Let’s explore the options available to Investors:
1. Mutual Funds
These are pooled investments managed by a professional fund manager. There’s an entire universe of mutual funds.
Broadly, there are Equity and Debt mutual funds. While equity mutual funds are riskier and more volatile, debt funds can be an alternative to fixed deposits. In finance, there’s one simple rule: The higher the returns, the higher the risk.
Debt funds are classified on the basis of:
1. Duration: The longer the duration, higher the sensitivity of change in price of the bond.
2. Types of investment: Debt funds invest money in several instruments ranging from money market instruments to corporate bonds. Gilt funds carry less default risk than credit-risk funds.
Another method to get exposure to bonds is to directly invest in bonds. There are several methods to do so. You can directly place bids for various new offerings via brokers. Further, RBI recently launched a Retail direct platform to facilitate investment in govt. securities – Treasury bills, Central / State govt. Bonds, etc. However, direct investing in bonds requires thorough research and carries more risks. For newbies, investing in debt funds is ideal.
Fact: Government securities offer the maximum safety as they carry the Sovereign Guarantee.
3. National Savings Scheme (NPS)
It is a defined contribution voluntary pension scheme launched by Govt. of India. It is a low-cost product that can provide attractive market-linked returns. They invest in equity, bonds, and govt. securities and are managed by fund managers. Further, tax benefit upto INR 50,000 is available under this scheme. However, this is a pension scheme. Therefore, it comes with a lock-in period until the age of 60.
3. Floating Rate Saving Bonds (FRSB)
FRSBs are issued by the Reserve Bank of India (RBI) on behalf of Govt. of India. As the name suggests, coupon rate is not fixed in FRBs like bonds. The coupon is linked to the National Savings Certificate (NSC) + 35 bps spread. They have a maturity of 7 years and do not provide any tax benefit, but coupon rate is generally higher.
4. Post Office Schemes
There are multiple post office schemes available to investors:
1. Public Provident Fund (PPF) – A long term tax-saving investment option where the lock-in period is 15 years.
2. Sukanya Samriddhi Account (SSA) – A govt. of India initiative targeted to the parents of girl children.
3. National Savings Certificate (NSC) – A government savings bond scheme targeted to investors looking for tax savings. NSC has a lock-in period of five years.
5. Hybrid Funds
As the name suggests, they are a mix of equity and debt. They are further classified in the Aggressive or Conservative approach. Aggressive invests more in equity and less in debt instruments, while Conservative hybrid funds take more exposure in debt. Taxation of it depends on the equity exposure of the fund.
There are multiple types of Fixed Deposits available to investors, however, only bank FDs are common. List of other FDs that one can consider investing in:
1. Corporate FD – These FDs are issued by companies. Generally, they provide higher returns than Bank FDs. The interest rate of FDs can be significantly influenced by the credit rating of the FDs issued. The lower the rating, the higher the interest rate.
However, direct investing in them is more-riskier, they are not insured by Deposit Insurance and Credit Guarantee Corporation (DICGC). Investing via debt funds is the ideal route.
2. Senior Citizen FDs: Investors aged more than 60 years are eligible to invest in Senior citizen FDs. They carry higher interest than regular FDs.
3. Tax Saving FDs: Unlike regular FDs, they provide tax benefit of up to INR 1,50,000 under section 80C but comes with a lock-in period of five years.
Options for Senior Citizens
1. Senior Citizen Savings Scheme (SCSS): SCSS is a post office scheme offered to senior citizens, i.e., 60 years and above. The interest rate in SCSS is higher as compared to other options, and also tax benefit under section 80C is there. However, a maximum of INR 30 lakhs can be invested in this, and they come with a lock-in period of five years.
2. Bank FDs: As the name suggests, senior Citizen FDs are targeted to senior citizens only. They offer higher interest rates and flexible tenure as compared to regular bank FDs. However, no tax benefit is available in such FDs.
Now, you will ask why all this when one can simply invest in FDs, well there are multiple reasons:
1. Taxation: Capital gains from fixed deposits are taxed as per your income slab rate. If you fall in the bracket of 30%, then it might not be efficient for you.
2. Maturity: For long-term investment, FDs provide fewer options. In Bonds, you can even invest for 40 years.
3. Safety: After recent cases of PMC and Yes Bank, we can say that FDs are not 100% safe and so are the other investment option. Generally, the central govt. issued securities like Treasury Bills, Bonds are the safest instrument to invest as they are backed by Sovereign Guarantee. If such securities give higher returns, then investment in these is preferred over regular FDs.
Fact: Bonds issued by State Government / State Development Loans (SDLs) generally provide higher returns than regular bank FDs.
4. Withdrawal: In case of premature withdrawal in FDs, one has to pay penalties. However, in the case of instruments like bonds, you can sell in open market as well, even before the maturity (considering enough liquidity is available). Further, if market conditions are in favour of you, then apart from fixed coupons, you can also get capital gains.
FDs are the most preferred investment option in India, but considering their recent fiasco and returns potential, exploring other investment options as per risk appetite and investment horizon can provide better diversification and safety. Few can give you better returns, and few instruments are more tax efficient.
Consider the risk profile, investment horizon, and financial goal, then select the best available option that aligns with your goal and invest money there.
Frequently Asked Questions (FAQs)
Which is more liquid: Liquid funds or Short duration funds?
Liquid funds.
What is the maximum limit to invest in Senior Citizen Savings Scheme (SCSS)?
One can invest up to INR 30,00,000 in SCSS.
What are the investment options in which tax benefit under section 80C is available?
Tax Savings FDs, National Savings Certificate (NSC), ELSS Funds, SCSS for Senior citizens, etc.
Are Fixed Deposits insured in India?
Fixed deposits in India are secured till INR 5,00,000 by Deposit Insurance and Credit Guarantee Corporation (DICGC).
Disclaimer: The securities, funds, and strategies mentioned in this blog are purely for informational purposes and are not recommendations.
First, we need to understand what is risk and the factors that create risk in the stock market before we learn about risk management.
In mathematical terms, risk is measured by standard deviation. It is a standardised measure of variation from the mean whether upside or downside. However, traders are more concerned about downside deviation. In simple language, risk in trading means traders fear losing the capital deployed in the market.
Various factors like market fluctuations, interest rate changes, volatility, and poor financial results can cause risk.
What is Risk Management?
Risk management is considered a cornerstone for effective trading. It involves identifying, analysing and mitigating potential risks in capital preservation while trading and achieving long-term success.
Traders, when trading in stocks, commodities, currencies, or any kind of financial instrument, implement different risk management strategies to control and minimise the losses incurred on their capital.
Effective risk management helps the trader to make informed trading decisions, help overcome fear and greed, and generate better returns.
Strategies of Risk Management
1. Position Sizing
Position sizing means determining the capital allocation on a particular trade depending on the total capital and risk appetite.
2. Stop-loss Orders
Setting pre-defined stop loss orders while trading not only automatically exits your positions but also reduces risk and minimises potential losses. You can trail your stop loss which means that you can modify your stop loss based on the changes in prices of the stock.
3. Risk-Reward Ratio
Aim for trades with risk-reward ratios greater than 1:1, meaning potential profit outweighs loss and try focusing on trading opportunities with limited downside potential.
4. Defining risk tolerance
Before entering into a trade, do not forget to define the maximum loss you can afford if a security slips into losses. Risk tolerance is generally based on your financial goals. Avoid taking excessive risks.
5. Hedging
Hedging is defined as a financial strategy that traders and investors use to protect their portfolios. It offsets losses with gains by taking an opposite position in the financial instrument you are trading.
6. Diversification
Remember the famous saying, “Do not put all your eggs in one basket”. Do not concentrate your capital on a single stock or financial asset. Diversification of the portfolio is crucial to avoid over-exposure to risks.
7. Cost-Averaging
When averaging the stocks, you buy them at different low prices at regular intervals. This helps in managing the price risk.
Algorithmic Trading, also known as algo trading, involves the usage of computer algorithms to execute trades.
No doubt that algorithmic trading in recent times has been revolutionary since it provides traders with speed, automation, efficiency, and no human bias while executing trades. However, it comes with risk and can amplify your losses. Therefore, it is necessary to manage the risk caused by algo trading.
Strategies for risk management are more or less similar for manual and algorithmic trading. In addition to the above-mentioned strategies, other points that a trader needs to focus on are as follows:
1. Conduct thorough back testing to analyse the past performance of the algorithm that you are using. Try implementing the strategies in different and extreme market conditions to ensure proper working. This will help you identify potential risks.
2. Do work on failover mechanisms to manage technical failures and analyse how the algo will react in such situations.
3. Regularly monitor algorithm performance, track risk metrics, and adapt strategies as needed.
Trading Psychology and Risk Management
Trading psychology and risk management are two important pillars of successful trading, intricately woven together like the warp and weft of a well-made fabric. You need to control your emotions to implement effective risk management.
Phycological factors like overconfidence, greed, and fear of loss can lead to poor risk management and impulsive decisions. Identifying your emotional triggers can help you manage your losses and mitigate the risks involved.
You need to train your mind and develop a plan while trading in the markets and cultivate the discipline to stick to your trading plan so that you can achieve long-term success.
Remember that trading psychology and risk management are ongoing processes that you need to continuously learn to refine your strategies and do not forget to seek professional advice to get valuable insights about the market.
Risk management is necessary for intra-day traders since they carry out several daily trades. This increases the chances of losses. Therefore, day traders should stick to their pre-determined risk limit and avoid overtrading.
Developing a trading plan that defines the entry/exit point for your trades can help the day-traders in risk management. If a day trader wishes to manage the risk, he or she must be particular with leverage. Leveraging can lead to an increased risk of losses.
Identify and trade with the prevailing trend. This can improve the probability of success and reduce the likelihood of being on the wrong side of a significant move. Do not trade just because you incurred a loss in your previous trade. Revenge trading often led to losses.
Risk Management – Forex and Options Trading
The above-mentioned strategies for risk management work well with forex and options trading.
But forex trading, with its high leverage and 24/7 market access, carries significant risks. By implementing the strategies discussed above and using technical analysis to understand the market trends, you can execute proper risk management to preserve your capital.
In the case of Options trading, apart from the above-listed points, additional areas to keep in mind so that the risk can be managed are
1. Aiming for delta-neutral positions to minimise exposure in direction trades.
2. Use credit spreads like bull call spreads or bear put spreads to reduce the exposure.
3. You should be aware of the effect of implied volatility on the prices of the option and adjust your positions accordingly.
4. Options lose their value with time because of theta decay. One must adjust position size and expiry dates accordingly to manage the risk.
On a parting note, risk management is a wise practice. It helps to safeguard your capital and guides your journey towards long-term growth. It does not matter if you are a seasoned trainer or a newbie, intraday trader or positional trader, analysing risk and understanding is important to function in the market.
There is no one-size-fits-all approach. Your risk management plan should be personalised as per your risk tolerance and capital availability.
S.NO.
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Recently, there have been a lot of new IPOs in Indian markets that have given stellar listing gains to investors. However, the better the potential IPO, the lesser the chances of getting an allotment for Retail Investors. Don’t worry; we will be discussing how you can invest in an Initial Public Offering (IPOs) via the mutual fund route.
Mutual funds are pooled investments that aim to provide capital growth to investors in the long term. They are classified according to asset class, financial goals, and structure. In this blog, we will discuss the thematic funds—IPO theme.
Thematic funds are similar to sectoral funds, which fall under equity mutual funds category and are professionally managed by a fund manager. Their strategy involves investing in a particular theme, e.g., IPO theme, Digital and tech theme, etc.
There is one such mutual fund in the industry that will enable you to invest in quality IPOs without worrying about allotment status. We are referring to “Edelweiss Recently Listed IPO Mutual Fund”. It is a thematic fund that will assist you in investing in quality IPOs that have either recently been listed or are going to be listed on the exchanges.
Edelweiss converted its “Maiden-Opportunities Fund”, a close-ended scheme launched in February 2018, to the “Recently listed IPO Fund, an open-ended scheme” open to new investments since June 2021.
As per Edelweiss, the following is the strategy of the fund:
1. The fund will invest in the recent 100 IPOs to capture listing and post-listing gains.
2. The fund will invest in new-age businesses that are getting listed in the Indian market.
3. The fund will invest in companies across sectors with a bias towards small and mid-caps that promise growth.
4. The fund will not invest in weak businesses that can be highly impacted by market shocks.
1. More than 72,000 people have invested in this mutual fund.
2. Its expense ratio is 0.92% and has an exit load of 2% if redeemed within six months.
3. Since inception, the fund has given an app. annualized return of 15%.
4. Only such thematic mutual fund available in the industry.
5. The fund’s asset under management (AUM) is INR 943 crs.
Positives if you invest in such thematic mutual funds:
Get access to a large number of IPOs with minimal investment amounts without the headache of research and analysis.
You don’t have to worry about the non-allotment of IPOs, as such funds place bids via the QIB route (Qualified Institutional Buyers).
High growth potential as the fund will invest in new-age businesses with a bias towards small and mid-caps.
Negatives if you invest in such thematic mutual funds:
IPO-themed funds are relatively new in the industry, with a minimal track record. Further, there is only one IPO-themed fund in the industry as of December 2023, so comparing its characteristics and returns can be challenging.
Thematic funds have a narrowly defined investment focus, which provides less freedom to the fund manager to invest in profitable companies.
The fund’s AUM may get smaller if the quality of new IPOs declines.
Thematic funds are not suitable for short-term horizons. These funds may have negative or poor returns during the bear market or in the short term.
Thematic funds substantially carry more risks than other categories of mutual funds, as news and events related to a particular sector can impact the entire sector.
Conclusion
We have discussed one of the thematic funds, the IPO theme. Thematic funds are equity mutual funds that invest in a particular theme. As we discussed above, the IPO theme is relatively new, and the only fund available in the industry as of now is the “Edelweiss Recently Listed IPO Fund”. Assessing the long-term prospects of such funds can be challenging. Further, thematic funds generally carry a higher risk than other categories of mutual funds because of their concentrated approach and smaller investment universe.
The optimal asset allocation approach is to choose mutual funds after consulting with a financial advisor and assessing your investment horizon and risk appetite. Investments in thematic mutual funds shouldn’t constitute a significant portion of your portfolio.
Digital and AI theme, IPO theme, Clean energy theme, etc.
What is the risk profile of thematic funds?
Thematic funds carry a very high level of risk.
How many IPO-themed mutual funds are available in the industry?
As of December 2023, only one fund invests in the IPO theme.
What are the Sectoral Funds?
Both are almost similar; thematic funds focus on themes such as IPO, Digital India, etc., while sectoral funds focus on a particular sector such as Healthcare, FMCG, Financials, etc.
What is QIB?
QIB stands for Qualified Institutional Buyers. These are institutional buyers with expertise in capital markets. Example: Mutual Funds, Alternative Investment Funds, Endowment Funds, etc.
You must have heard these statements: “Nifty hits a new high, Nifty crashes 500 points”…
You must be wondering: What exactly is Nifty 50? What is it, what happens if it rises or falls, and how do I invest in it? We will unwind all these questions in this blog.
The Nifty 50 is an equity market index comprised of the 50 largest publicly traded companies in India. It was launched in 1996 and is currently managed by NSE Indices Ltd. (formerly NSE Strategic Investment Corporation Limited).
The 50 stocks included in the Nifty 50 are selected based on their free-float marketcapitalisation*. These 50 stocks can also be considered “blue-chip” stocks, as they are India’s largest and most liquid equity securities.
*Free float market cap: (outstanding shares – locked-in shares) X current market price
Nifty 50 is used to gauge the overall market sentiment, as 50 stocks in the Nifty 50 index are blue-chip companies from different sectors. There are numerous categories in the index universe, ranging from equity to debt, broader to concentrated. We will cover this in detail in a separate blog.
Apart from the Nifty 50, there is another broader market index in India, the Sensex. It is also a free-float market-weighted index but consists of 30 stocks compared to 50 in the Nifty 50 index.
Fact: All NSE indices are managed by a team of professionals. The governance structure of NSE Indices Limited consists of three tiers: the Board of Directors, the Index Advisory Committee (Equity), and the Index Maintenance Sub-Committee.
Index Variants:
There are multiple variants of the Nifty 50 Index:
Nifty 50 USD: A US dollar-denominated Nifty 50 index.
Nifty 50 Total Returns Index: In this, the dividends received from the constituent stocks are also factored into the index values, as a price index does not consider the returns arising from dividend receipts. Therefore, to get a true picture, the Nifty 50 Total Returns Index, which includes the dividends received, was established.
Nifty 50 Dividend Points Index: The Nifty 50 Dividend Points Index is designed to track the total dividend from the constituents of the Nifty 50 index.
There are certain criteria that need to be fulfilled for a stock to be included in the Nifty 50 Index:
Constituents of the Nifty 100 index that are available for trading in the NSE’s Futures & Options segment are eligible for inclusion in the Nifty 50 index.
The company’s trading frequency should have been 100% in the last six months.
The security should have traded at an average impact cost* of 0.50% or less during the last six months for 90% of the observations for a portfolio of INR 10 crores.
The company should have a listing history of six months.
The company should have a minimum listing history of 1 month as of the cut-off date.
*Market impact cost (cost of executing a transaction) is the best measure of the liquidity of a stock. It accurately reflects the costs incurred when trading an index.
Re-balancing
The index undergoes testing every six months to see if rebalancing is necessary. The cut-off dates for the assessment of indices are January 31 and July 31 of each year. This means that the average data for the six months leading up to the cut-off date is taken into consideration. The market is notified four weeks in advance of the date of change.
Let’s understand this with an example: Assume Adani Enterprises Ltd. fell 50% and is no longer in the list of the 50 largest businesses by free float market cap; therefore, at the time of rebalancing Nifty 50, it will be replaced by the next stock in the Nifty Next 50 index list.
The inclusion and exclusion of any particular stock can create temporary volatility in that stock because of adjustments made by numerous index funds and ETFs.
Stocks In TheNifty 50:
As explained above and suggested by the name itself, it consists of 50 stocks. Some major names are Reliance, HDFC, SBI, Infosys, ITC, etc.
Top constituents by weightage as of October 2023:
Company’s Name
Weight (%)
HDFC Bank Ltd
13.24
Reliance Industries Ltd.
9.25
ICICI Bank Ltd
7.66
Infosys Ltd.
5.84
ITC Ltd.
4.53
Larsen and Toubro Ltd
4.23
Sectoral Distribution
Nifty 50 currently has exposure to 13 sectors, with the financial sector making up the majority. Have a look at the pie chart below (as of October 2023):
Purpose of Nifty 50
Now you must be wondering: What is the use of an index? The Nifty 50 plays an important role in shaping market sentiments and forms the basis for multiple investment strategies.
An index can be used for several purposes:
To gauge broader market sentiments.
Act as a benchmark for actively managed portfolios.
Acts as an economic indicator.
Forms the basis for various investment products, such as index funds, ETFs, index-based derivatives, etc.
How To Invest In Nifty 50:
There are multiple ways to do it:
Index Fund
ETF
Direct Investing: Individually own all 50 stocks as per the actual weightage (not recommended)
Pro tip: Always go with the index fund with the lowest expense ratio and tracking error. These factors differentiate an index fund, as all the Nifty 50 index funds invest only in those 50 stocks.
Diversification: The major benefit of investing in broader market indices such as Nifty 50 is diversification, which means you are no longer exposed to any particular stocks or sector.
No Biasness: Stock selection is purely based on free-float market capitalization, eliminating human bias.
Less Expensive: Index funds and ETFs are less expensive than active mutual funds.
Demerits of Investing in Nifty 50:
Risk of return: Over a long time horizon, broad market indices generally correlate with a country’s economy. If a country is not doing well economically, it may give negative to nil returns on investment. Consider the example of Japan’s premier index, Nikkei 225. Between 1991 and 2023, it generated an approximate return of just 40%.
If any particular stock rises so much, it may cause significant movements in the index, and the index no longer represents the sentiments of the market; it is basically one stock moving the index.
While the Nifty 50 is a diverse index, it may not fully represent the entire Indian market, for example, small-cap and mid-cap stocks. As of March 2023, there are 2,137 listed companies on the National Stock Exchange.
Nifty 50 Returns
Over the last few decades, Nifty 50 has performed incredibly well. Have a look at the snippet below:
Source: Nseindia.com
The above chart is from 2000 to 2023 (November). It has given returns of app. 11 times during this period, which means 1000 rupees invested in 2000 have now become 11,000 in 2023.
From November 1995 (inception) to November 2023, Nifty 50 has generated an annual return of 11.28% (excluding dividends).
Conclusion:
The Nifty 50 index is a well-diversified index comprising 50 companies reflecting the overall market, with the finance sector being the majority. The free-float market capitalization method is used to calculate it. Its diverse composition, historical significance, and role as a benchmark make it a crucial element for investors. The Nifty 50 can be used to benchmark fund portfolios, launch index funds, and ETFs, among other things. There are several uses of an Index in the financial world. Buying a low-cost index fund is the ideal way to invest in the Nifty 50.
Frequently Asked Questions (FAQs)
How many stocks are there in the Sensex index?
30 stocks, while Nifty 50 consists of 50 stocks.
What is the ideal method to invest in Nifty 50?
Low-cost index fund.
Does buying Nifty 50 mean taking a small piece of the entire market?
Not really. Although the Nifty 50 is a diverse index, it may not fully represent the entire Indian market, for example, small-cap and mid-cap stocks.
Is the Nifty 50 a broad market or strategy index?
Broad market index
In how many months is the rebalancing of the Nifty 50 tested?
Nifty 50 is tested for rebalancing every six months. The cut-off dates are January 31 and July 31 of each year.
To choose between SIP in stocks and SIP in mutual funds, first we need to understand the fundamentals of mutual funds, stocks, and SIP. Check out this blog to get answers to all your questions.
What is a Mutual Fund?
It’s a pooled investment fund overseen by a professional fund manager. It gathers funds from investors who want to invest in the stock market. Depending on the type of mutual fund, these collected funds are then diversified into various asset classes. Mutual funds can differ from, open-ended to close-ended, and from actively managed funds to passively managed funds. Every mutual fund unit is allotted NAV, which is net asset value. It is the combined value of all the asset classes that you hold in your portfolio.
What are Stocks?
A stock, also known as equity or share, represents a part of ownership that an individual holds in a corporate or government company. Investing in stocks carries a level of higher risk because the value of a stock can be influenced by various factors, including the company’s financial performance, economic conditions, and market sentiment. However, stocks have historically offered higher returns compared to other investment options.
What is SIP?
SIP stands for Systematic Investment Plan. It is an investment method in mutual funds and stocks where you invest a fixed amount of money at regular intervals. SIP can be done for an amount as small as INR 500. SIPs are long-term investment strategies that help you compound your money over the years.
Having discussed the basics of mutual funds, stocks, and SIP, let us go through what SIP in mutual funds and SIP in stocks looks like.
SIP in Stocks
SIP in stocks involves regular investment in a specific stock at pre-determined intervals. Stock SIP can be used for averaging your shares, thereby reducing their purchase price. The concept of stock is more or less similar to SIP in mutual funds, which we shall discuss later in this blog.
Below are some key facts an investor should know before choosing stock SIPs.
SIP in stocks will give you direct exposure to individual stocks that can help you generate better returns, but as you know, reward and risk go hand in hand. This SIP method is susceptible to market fluctuations, which can significantly impact returns.
SIP in stocks will give you more freedom as you are solely responsible for selecting your allocation. However, selecting specific stocks involves in-depth research and analysis of companies as well as the overall trend of the market, which can be challenging and stressful at times.
Stock SIPs involve regular monitoring of the stocks and can be a tough task.
Diversification of the portfolio becomes difficult when using SIPs in stocks because it can be difficult to maintain multiple SIPs and stay current on research and new developments.
Stock SIPs can be a good option for investors who are well-versed in market fluctuations.However, for most of the investors, it is suggested to do SIP in mutual funds.
SIP in Mutual Funds
Mutual fund SIP involves regular investment of a fixed amount into a mutual fund. This method indirectly invests in multiple stocks and other instruments; therefore, it allows investors to allocate capital as per their risk profile. There are a plethora of mutual funds available in the industry, ranging from equity based to debt based. Check out our blog on mutual funds to learn more!
Below are some key points that an investor should remember before choosing SIPs in mutual funds:
Mutual funds offer diversification and carry less risk as compared to stock, as mentioned earlier, and reduce the impact of poor performance of a single security.
Investors can start their financial journey with mutual fund SIPs from as low as INR 100, which makes it accessible to people of all income groups in a country like India, but keep in mind that mutual fund investments are always subject to market risk.
Mutual fund SIPs allow disciplined and regular investing. You do not need to monitor and analyze your portfolio on a daily basis.
There are two ways to transact SIPs:
You can manually pay the amount via UPI, Net banking, etc., at intervals.
You can set-up an auto mandate authorizing your bank to automatically deduct a specified amount from your bank account at every interval.
Similar to stock SIP, investors can enjoy the benefits of rupee cost averaging in mutual funds SIP. With this, the NAV of the mutual fund unit will be allotted at lower prices.
Investors can choose SIPs based on their risk profile and financial goals, such as equity funds for capital appreciation, debt funds for stability, or hybrid funds for a balanced approach. However, before choosing any scheme, be aware of the expense ratio and other fees associated with mutual funds.
It includes several charges: expense ratio (covers admin-related expenses and fund manager fees), exit load, redemption fees, etc.
Conclusion
SIP in mutual funds offers a disciplined way of investing, and people who wish to stay committed to the markets for the long term can choose this route. However, it is suggested to only those investors who are aware of the market technicalities and are willing to research companies. It requires active involvement as compared to mutual fund SIPs.
In summation, before starting your SIPs, carefully assess your financial goals and risk appetite. It is advised that you speak with a financial advisor to receive individualized portfolio support.
