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  • Multi-Cap Vs Flexi-Cap Mutual Funds? Which Is Better For You?

    Multi-Cap Vs Flexi-Cap Mutual Funds? Which Is Better For You?

    Multi cap vs flexi cap

    You are a well-versed investor and recently stumbled upon multi-cap and flexi-cap mutual funds and asked yourself, what exactly is the difference. We will unfold your question in today’s blog.

    Firstly, if you are new to the world of mutual funds, check out our blog: Mutual Funds: Meaning, Types, Features, Benefits and How They Work.

    Mutual funds are classified according to asset class, financial goals, and structure. Multi-cap and Flexi-cap are both similar to other equity mutual funds, which are pooled investments, and they aim to provide capital growth to investors in the long term. Both funds fall under the umbrella of active mutual funds.

    Multi-Cap Vs Flexi-Cap Mutual Funds

    Read Also: Equity Mutual Funds: Meaning, Types & Features

    Multi-Cap Funds

    Multi-cap funds are active equity mutual funds that invest in large-cap, mid-cap, and small-cap stocks. As per the latest circular released by SEBI, at least 75% of the investments made by multi-cap mutual funds are in equity and equity-related instruments. The investments should be made in the following manner:

    1. Investments in large-cap companies: at least 25% of the total assets.
    2. Investments in mid-cap companies: at least 25% of the total assets.
    3. Investments in small-cap companies: at least 25% of the total assets.

    The advantage of multi-cap funds is that your capital is invested in all three caps (at least 25%), with mid and small caps being more volatile than large caps, which can yield an ample return in the long run. However, keep in mind that there is no guarantee that multi-cap funds will outperform other mutual fund classes; in fact, multi-cap funds can be more volatile in the short run.

    Flexi-Cap Funds

    The Securities and Exchange Board of India (SEBI) and the Association of Mutual Funds in India (AMFI) have launched a number of initiatives in India to raise public awareness and confidence in the financial sector.

    SEBI introduced this category of mutual funds in November 2020 after receiving recommendations from the Mutual Fund Advisory Committee (MFAC). As per the circular released by SEBI, it is an open-ended, dynamic equity scheme investing across large-cap, mid-cap, and small-cap stocks.

    In the flexi-cap fund, at least 65% of the investments should be invested in equity and equity-related instruments. However, as compared to multi-cap funds, there is no minimum criterion to invest this 65% across large, small, or mid-cap stocks. The advantage of flexi-cap funds is that fund managers have more investment flexibility to invest money across large, mid, and small caps.

    Let’s look at the below comparison. We have selected one mutual fund from each category:

    1. Parag Parikh Flexi Cap Fund
    2. Nippon India Multi Cap Fund
    Parag Parikh flexi cap vs Nippon India multi cap
    Source: Valueresearch

    As you can observe, the Parag Parikh flexi-cap fund has more investment in large-cap funds than the Nippon India multi-cap fund. Further, the Parag Parikh flexi-cap fund has only a 1% investment in small-cap stocks. Flexi-cap funds provide more flexibility for investments as compared to multi-cap funds, as there is no regulatory requirement for flexi-cap funds.

    Choosing Between Multi-Cap and Flexi-Cap:

    ParticularsFlexi-cap fundMulti-cap fund
    Equity ExposureAt-least 65% investment in equity and equity-related instrumentsAt-least 75% investment in equity and equity-related instruments
    Asset AllocationFund managers have flexibility in asset allocationAt-least 25% in each of the cap: large, mid and small
    RiskVery HighVery high
    VolatilityLow as compared to multi-capHigh as compared to flexi-cap
    TaxSubject to both STCG and LTCGSubject to both STCG and LTCG

    Read Also: What are Small Cap Mutual Funds? Definition, Advantages, and Risks Explained

    Conclusion

    We have discussed the similarities and differences between flexi-cap and multi-cap mutual funds. Both are equity mutual funds and provide diversification to your mutual fund portfolio. However, the key difference in both is the equity exposure and the asset allocation. The minimum percentage of equity and equity-related instruments that flexi-cap funds and multi-cap funds can invest in is 65% and 75%, respectively. Further, multi-cap funds must invest at least 25% in each class: large, mid, and small-cap, whereas flexi-cap funds have greater flexibility.

    The best mutual fund strategy is to select mutual funds based on your risk appetite and time horizon after consulting with your financial advisor.

    Frequently Asked Questions (FAQs)

    1. Are multi-cap and flexi-cap active or passive funds?

      Both multi-cap and flexi-cap are active mutual funds means they are actively managed by a professional fund manager.

    2. Can flexi-cap funds invest in debt securities?

      Yes, as long as a fund has at least 65% of its investments in equity.

    3. What is the risk profile of flexi-cap and multi-cap funds?

      The risk profile for both funds is very high, as both are equity mutual funds.

    4. Are multi-cap funds more volatile than flexi-cap funds?

      In general, the answer is yes, because multi-cap funds must invest at least 25% in small-cap and mid-cap funds due to regulatory requirements, whereas no such requirement for flexi-cap funds.

    5. When did flexi-cap funds launch?

      In November 2020, SEBI introduced flexi-cap funds.

  • Top Indicators Used By Intraday Traders In Scalping

    Top Indicators Used By Intraday Traders In Scalping

    Scalping

    Ever heard of the term “Scalping”? What is it, how traders use it, etc? Don’t worry, we will unwind all these questions in this blog.

    Top Indicators Used By Intraday Traders

    Scalping is a trading strategy that involves buying / selling securities in large amounts but for a very short time frame. The time frame can be as short as a few seconds. The ideology behind this strategy is that people think it is easier to make quick profits in a shorter time than to get stuck in long periods.

    Illustration of a Scalp Trade:

    Illustration of scalping

    Traders who do scalping are often known as “scalpers.” Scalpers use a combination of technical indicators for quick decisions and the identifying entry and exit points. In this blog, we will learn about the technical indicators that scalpers often use.

    Key Features of Scalping

    1. The time frame used by most scalpers ranges from 1 minute to 15 minutes. In a few cases, it can be as low as a few seconds.

    2. Generally, scalping is considered less risky than long or multiple-time frame strategies such as swing trading or positional trading.

    3. High Frequency Traders (HFTs) indulge in scalping and generally use Algorithmic trading.

    4. Scalpers often trade with pre-determined entry and exit levels and are quick to take off profits or book losses.

    Benefits of Scalping

    1. Less risky: As discussed, scalpers trade in a very short time frame with pre-defined entry and exit levels, eliminating the potential risk of significant losses.

    2. Only technical, no fundamental: Scalpers operate in a short time frame where decisions are purely based on technical indicators and no fundamental analysis (stock news, events, financial analysis) is used.

    3. All-weather strategy: Scalping is an all-weather strategy that can be used in bullish as well as bearish markets.

    Drawbacks of Scalping

    1. Transaction Costs: Scalpers indulge in multiple trades during the day, which results in very high transaction costs, including but not limited to: Brokerage, STT, Stamp duty, Exchanges fees, etc. In cases of low margins, transaction costs often eat up entire profits.

    Check out our blog: Different Types of Charges in Online Trading

    2. Tech Issues: Scalping means buying or selling in a very short time frame, and scalpers often use algorithmic trading. Even a few seconds of delay can significantly hamper the outcome of a trade and tech issues are common in India, including broker-related glitches, internet connectivity, etc.

    3. May not be suitable for illiquid securities: Scalpers generally prefer trading in highly liquid securities, as to buy / sell in large quantities, liquidity is a must requirement. In certain markets, liquidity is not enough, which shortens the horizons of scalpers, and they end up trading in scattered markets.

    4. Shorter time frames are less reliable: As explained above, they trade in a very short time frame. However, there is a general phenomenon: the longer the period, the more reliable the indicator. Therefore, scalpers are prone to false signals which increases their challenges.

    Read Also: What is Scalping Trading Strategy?

    Technical Indicators Used in Scalping

    Technical Indicators

    So far, we have discussed scalping, its key features, merits, and demerits. Let’s deep dive into the most commonly used intraday technical indicators used by scalpers for trading in equity, commodities, and forex markets:

    1. Moving Averages

    Moving averages are price-based indicators, meaning they combine current and historical prices. It is the average of the price of security over a specified number of periods. The most popular moving average periods used by traders are the 20, 60, 100, and 200 periods. A widely followed moving average crossover signal is between 50 and 200 periods, often referred to as the “Golden Cross”.

    Moving averages can be of multiple types and are less volatile than the price of a security. The most popular averages used by traders are: Simple Moving Average (SMA) and Exponential Moving Average (EMA). The key difference between the two is that SMA uses equal price weights while EMA gives more weight to the recent prices. 

    Moving averages are often used to identify potential buy or sell levels. When a moving average of a particular time frame, say 20 periods, crosses another moving average of another time frame, say 50 periods, it is a bullish crossover. They are also used to identify support and resistance levels; the longer the timeframe, the stronger the support or resistance level.

    2. MACD Indicator

    Moving Average Convergence Divergence (MACD) is a momentum technical indicator formed by the difference between short-time frame and long-time frame moving averages. It is formed by the two lines:

    1. MACD Line: It is the difference between two EMA of different time frames (generally 26 and 12 periods).
    2. Signal Line: It is the EMA (9 periods) of the MACD line.

    It is often used to identify potential buy or sell signals.  When the MACD line crosses above the signal line, it indicates a buying signal, or vice versa.

    3. Bollinger Bands

    Renowned trader John Bollinger developed Bollinger bands. Bollinger bands provide an approximate range of security that is expected to trade within. It consists of three bands: the upper, middle, and lower bands. While the middle band is the moving average of a particular time frame, say 20 periods, the upper and lower bands are decided based on the standard deviation.

    The more volatile the security, the higher the standard deviation and wider the range of upper and lower bands.

    4. Relative Strength Index

    It measures the level of recent price change in a security computed over a rolling time period. It is used to evaluate overbought or oversold zones. It can also be used to identify potential reversal points. It moves in a range of 0 to 100.

    Generally, an RSI above 70 is considered an overbought zone, while an RSI below 30 is considered an oversold zone.

    5. Stochastic Oscillator

    The stochastic oscillator is a momentum indicator developed in 1950 and used to identify overbought or oversold zones. It is formed by comparing the closing price of a security to a range of its prices, say the 14-day moving average.

    It ranges from 0 to 100, and generally, above 80 means security is in overbought zone and below 20 means security is in oversold zone.

    Relative Strength Index (RSI) and Stochastic Oscillator are both used to measure momentum. RSI is widely used in directional markets, and stochastic oscillators are widely used in sideways markets.

    6. Fibonacci Retracement

    The Fibonacci sequence, discovered by an Italian mathematician, has applications in various aspects of life, including technical analysis in the financial markets. It is a set of steadily increasing numbers where each number is equal to the sum of the preceding two numbers. Example: 0, 1, 1, 2, 3, 5, 8,…

    Fibonacci Retracement is a popular tool used in technical analysis to identify potential levels of support and resistance and has great relevance in the technical analysis world. The most common “Fibonacci Retracement” levels are 23.6%, 38.2%, and 61.8%

    Analysing the potential level of retracement using “Fibonacci levels” offers great insights to a trader.

    Checkout our blog: Fibonacci Retracement: Complete Guide on How to Use and Strategy

    7. Parabolic SAR

    Parabolic SAR (stop and reverse), or PSAR, is a technical indicator developed by American engineer J. Wells Wilder. The “Parabolic SAR” indicator is a series of dots plotted either above or below the price of the security. When a security is in a bullish trend, a dot is positioned below the price; in a bearish trend, it is positioned above the price.

    It is often used to identify the trend’s direction and potential buy / sell signals. Further, it is used by traders to determine the range of trailing stop-loss orders.

    The de-merit of PSAR is that sometimes it may generate false signals, which results in poor earnings for scalpers.

    Read Also: How to Choose Stocks for Intraday the Right Way?

    Conclusion

    In this blog, we have unwinded scalping and widely used technical indicators by scalpers. However, it’s essential to remember that technical analysis is subjective and should be used along with other tools and indicators for more comprehensive decision-making.

    Although it is not suggested to new traders, if one wants to start scalping trading, making quick decisions, proper strategy, and risk management are must-haves to become a successful scalper.

    Further, the indicators that we have discussed above are useful for traders, but it’s essential to remember that no analysis method guarantees 100% prediction and prudent risk management is crucial in trading whether it is scalping or positional trading.

    Frequently Asked Questions (FAQs)

    1. What is the time frame used by scalpers?

      Generally, scalpers trade in the 1 minute to 15 minute range.

    2. What are the most common Fibonacci Retracement levels?

      23.6%, 38.2%, and 61.8%

    3. Can scalpers trade in bearish markets?

      Yes, scalping is a all weather strategy.

    4. Is there a need for Fundamental analysis in scalping?

      No, scalping is purely based on technical analysis

    5. Does an RSI of 90 indicates an overbought or an oversold zone?

      Traditionally, an RSI above 70 indicates an overbought zone.

  • Indian Oil Case Study: SWOT Analysis and Marketing Strategy

    Indian Oil Case Study: SWOT Analysis and Marketing Strategy

    Indian Oil Case Study

    Indian Oil Corporation (IOC) is the largest Indian public-sector oil and gas company, overseen by the Ministry of Petroleum and Natural Gas. It was formed in 1964 through the merger of Indian Oil Company Limited (established in 1959) and Indian Refineries Limited (established in 1958). The company has subsidiaries in Mauritius, Sri Lanka, and the Middle East.

    The company was established with the objective of refining and marketing petroleum products in India, but over the years it has expanded its business operations, including exploration and production, renewable energy, and petrochemicals.

    With an ideology of being ‘Pehle Indian Phir Oil,’ IOC focuses on the well-being and progress of the nation above all. To further emphasize this commitment, a new core value, ‘Nation First,’ was introduced alongside the existing values of care, innovation, passion, and trust on June 30, 2023. This date is historically significant as it marks the day in 1959 when Indian Oil Company Ltd. was incorporated.

    Indian Oil Case Study

    A few key facts about the IOC as of March 2024:

    1. IOC ranked 116th in the Fortune Global 500 list of the world’s largest companies.
    2. IOC has filed 1,736 patents as of March 2024.
    3. It has a refining capacity of 70 million metric tonnes per year (MMTPA) and operates 1,788 CNG stations.
    4. The Indian Oil Group owns and operates 9 refineries and has an over 17,000 km pipeline network.

    Market Information of Indian Oil Corporation 

    Current Market Price ₹129
    Market Capitalization (in ₹ Crores)1,81,740
    52 Week High₹186
    52 Week Low₹111
    Dividend Yield9.34%
    ROCE21.1%
    (Data as of 28 March 2025)

    Read Also: Castrol India Case Study: Business Model, Product Portfolio, And SWOT Analysis

    SWOT Analysis of Indian Oil Corporation

    Swot analysis

    We have done a SWOT analysis of IOCL . It is a management technique that analyses the strengths, weaknesses, opportunities, and threats of a company.

    Strengths

    1. IOC is a renowned and trusted brand in India. It supplies cooking gas to majority of Indian families and has a network of 12,861 distributors as of 2023. It has the largest downstream pipeline network of around 17,564 km which helps in the transportation of processed petroleum and crude oil.

    2. IOC is the major oil company in India, with significant economies of scale and a large refining capacity that allows it to fulfil the country’s demand for petroleum products.

    3. IOC carries a diversified business portfolio that includes refining, marketing, production, and exploration. This helps the company mitigate the risk caused by changes or fluctuations in another business segment.

    4. IOC has a vast distribution network, including retail outlets, and enjoys multiple benefits since it is under the supervision of the Ministry of Petroleum and Natural Gas.

    5. IOC has invested in advanced technologies for refining and production processes, enhancing efficiency and staying competitive in the industry. Also, it has Asia’s best research and development in the areas of lubricants and pipelines, with around 60 acres of campus near Delhi.

    Weakness

    1. Any kind of changes in the global price of oil can lead to adverse effects on the company and have significant impacts on the profitability of the company. Also, rules, regulations and policies of the government can slow down the growth of the company.

    2. IOC faces tough competition from companies like ONGC, Reliance, and Bharat Petroleum. IOC needs to develop and implement strategies in a way that can help to compete with other companies.

    3. The oil and gas industry, including refining, faces increasing scrutiny for its environmental impact. Compliance with stringent regulations can be a challenge.

    4. Although IOC is punching above its weight, it currently has a limited presence in renewable energy.

    Opportunities

    1. Digitalization and AI can help IOC onboard potential customers and analyse various trends. This could be a great opportunity for the company to grow rapidly.

    2. The Indian government supports the development of renewable energy and has launched various programs and incentives under “Atmanirbhar Bharat”. This could help the IOC expand its renewable energy business.

    3. The company is venturing into the production of alternative fuels, biofuels, or other innovative products to align with changing consumer preferences and environmental considerations.

    4. Growing economy will benefit the company over the coming years since India’s demand for oil is also rapidly increasing. The company is exploring opportunities in renewable energy so that it can align with global trends.

    Threats

    1. IOC faces increased competition from both domestic and international players. This can significantly affect the market share of the company.

    2. Talent risks, such as talent attraction and retention, can impact IOC’s growth and long-term sustainability.

    3. Environmental regulations can increase the input cost and operational expenses of the company.

    4. Changes in consumer behaviour like a shift towards other sources of energy like electric vehicles can be a sort of threat to petroleum-based products.

    Marketing Strategy of IOC

    Marketing strategy of IOC

    IOC uses a combination of traditional and modern marketing techniques to maintain its market leadership in the oil and gas sector.

    1. Pricing Strategy

    We are well aware that IOC is a government-owned company. The government makes major pricing decisions. The prices may vary from state to state in India. The IOC follows the geographic pricing mechanism while deciding prices, i.e., the prices are categorised into metro cities, national capital regions, and state capital regions. Also, the taxes imposed and subsidies provided by the Government impact the final selling prices of the oil. To check the latest pricing, you can visit the official website of the company.

    Read more in our blog on – how oil prices affect the stock market.

    2. Product Strategy

    IOC occupies the major share of the market when it comes to petroleum products in India. It has almost 70% share in downstream pipelines and 30% in refining capacity. The IOC product basket includes petrol, diesel, LPG (liquified petroleum gas), other refined products like kerosene and naphtha for industrial and commercial uses; petrochemicals like ethylene, benzene, lubricants, natural gas such as LNG and CNG.

    3. Place/Distribution Strategy

    IOC employs a multi-level distribution strategy to reach its extensive customer base across India. The company’s distribution strategy includes a network of direct and indirect channels. Distribution through direct channels includes petrol pumps. IOC has a vast network of around 36,000 petrol pumps across the country. With approx. 12,000 LPG distributorships that distribute LPG cylinders to households as well as industrial spaces. Distribution through indirect channels includes collaboration with supermarkets, merchant stores, and e-commerce platforms to sell lubricants, greases and other products.

    IOC operates its subsidiaries in Sri Lanka, UAE and other countries. It holds ten major refineries in places like Gujarat, Mathura, Panipat, Guwahati etc.

    4. Promotion Strategy

    Indian Oil has a history of launching memorable advertisements to keep its wide-ranging customer base intact. These campaigns have been instrumental in promoting and advertising the IOC brand. Some of the advertising campaigns for strategic marketing are listed below:

    • “Fill it to Feel it” in 2018 to highlight the fuel efficiency of IOC’s XTRAPREMIUM petrol.
    • “I Belong Here” in the year 2020 celebrated diversity by showcasing people from different cultures coming together to use IOC products.
    • “Sure Khayal Rakhega” in the year 2022 with a focus on LPG cylinders.
    • “Indane – Ek Bandhan Sath” in the year 2023 to show the emotional connection that families share with the LPG cylinders.
    • “Servo: The Power to Perform” is still ongoing.

    The above-mentioned campaigns and product development initiatives by IOC demonstrate its ability to create convincing advertisements with which common people can relate. After all, they know how to retain customers.

    Key Performance Indicators

    ParticularsMarch 2024 March 2023 March 2022
    Operating Margin (%)8.182.576.52
    Net Profit Margin (%)5.361.284.15
    ROE (%)22.75718.79
    ROCE (%)23.909.2317.61
    Current Ratio0.730.770.76
    Debt to Equity Ratio0.6710.93
    (Data as of 28 March 2025)

    Future Outlook

    Indian Oil Corporation (IOC) is strategically modifying its business operations to meet India’s growing energy demands while emphasizing sustainability. The company plans to expand its refining capacities, notably increasing the Panipat Refinery from 15 to 25 million metric tonnes per annum (MMTPA) and the Gujarat Refinery from 13.7 to 18 MMTPA by December 2025. In 2024, IOC announced a partnership with Panasonic Energy to establish 5 GWh of lithium-ion battery manufacturing by 2031 and boost its renewable energy capacity to 31 GW by 2030. Overall, IOC is committed to achieving net-zero operational emissions by 2046, aligning with global sustainability goals.

    Read Also: Case Study of Petrol & Diesel Price History in India

    Conclusion

    To conclude, IOC is the leading energy provider in India and is trying to diversify its product basket to offer the best to its customers. It has its own set of strengths and challenges. Its capacity to overcome changing market conditions, technological changes, and environmental obstacles places it in a strong position to contribute to India’s transition to energy security and sustainability.

    S.NO.Check Out These Interesting Posts You Might Enjoy!
    1Hindustan Unilever Case Study
    2Case Study on Apple Marketing Strategy
    3Reliance Power Case Study
    4Burger King Case Study
    5D Mart Case Study

    Frequently Asked Questions (FAQs)

    1. In which year was the IOC established?

      IOC was established in 1964.

    2. Who is the competitor of IOC?

      IOC faces tough competition from Reliance, ONGC, Hindustan Petroleum, etc.

    3. How many refineries are there in India?

      As of December 2023, there are 23 oil refineries in India.

    4. What is the full form of LPG?

      LPG stands for Liquified Petroleum Gas.

    5. What is the initial objective of the IOC?

      The company was established to refine and market petroleum products in India.

  • What Is Nifty 50? How To Invest In It?

    What Is Nifty 50? How To Invest In It?

    What Is Nifty 50 How To Invest In It

    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 market capitalisation*. 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.

    Nifty 50

    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.

    Categories of Indexes

    Index Variants:

    There are multiple variants of the Nifty 50 Index:

    1. Nifty 50 USD: A US dollar-denominated Nifty 50 index.
    2. 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.
    3. 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.

    Read Also : NIFTY Next 50 

    Criteria For Stocks To Be Included In Nifty 50

    There are certain criteria that need to be fulfilled for a stock to be included in the Nifty 50 Index:

    1. 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.
    2. The company’s trading frequency should have been 100% in the last six months.
    3. 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.
    4. The company should have a listing history of six months.
    5. 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 The Nifty 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 NameWeight (%)
    HDFC Bank Ltd13.24
    Reliance Industries Ltd.9.25
    ICICI Bank Ltd7.66
    Infosys Ltd.5.84
    ITC Ltd.4.53
    Larsen and Toubro Ltd4.23

    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):

    Sectoral distribution of Nifty 50

    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.

    Purpose of an Index

    An index can be used for several purposes:

    1. To gauge broader market sentiments.
    2. Act as a benchmark for actively managed portfolios.
    3. Acts as an economic indicator.
    4. 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:

    1. Index Fund
    2. ETF
    3. 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.

    Check out our blog on Index Funds vs ETFs!

    Benefits of Investing in Nifty 50:

    1. 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.
    2. No Biasness: Stock selection is purely based on free-float market capitalization, eliminating human bias.
    3. Less Expensive: Index funds and ETFs are less expensive than active mutual funds.

    Demerits of Investing in Nifty 50:

    1. 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%.
    2. 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.
    3. 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:

    Nifty 50 historical returns
    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)

    1. How many stocks are there in the Sensex index?

      30 stocks, while Nifty 50 consists of 50 stocks.

    2. What is the ideal method to invest in Nifty 50?

      Low-cost index fund.

    3. 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.

    4. Is the Nifty 50 a broad market or strategy index?

      Broad market index

    5. 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.

  • SIP in Stocks vs SIP in Mutual funds?

    SIP in Stocks vs SIP in Mutual funds?

    Which can be a better choice?

    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.

    SIP In Stocks Vs SIP In Mutual Funds

    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?

    MUTUAL FUND

    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?

    STOCKS IN 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.

    1. 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.
    2. 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.
    3. Stock SIPs involve regular monitoring of the stocks and can be a tough task.
    4. 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:

    1. 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.
    2. 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.
    3. Mutual fund SIPs allow disciplined and regular investing. You do not need to monitor and analyze your portfolio on a daily basis.
    4. 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.
    5. 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.
    6. 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.

    Read Also: SIP vs Lump Sum: Which is Better?

    SIP in stocks vs. SIP in mutual Fund

    Let’s explore the table of differences below for a better understanding:

    BasisSIP in StocksSIP in Mutual Fund
    RiskHigh – Market expertise is requiredRisk is comparatively lower as it is managed by a fund manager.
    Research RequirementHighLow to none
    ManagementSelf-directedProfessionally managed
    OwnershipDirect ownership in your de-mat accountIndirect ownership as shares are purchased by mutual funds and its units are allocated to you
    ChargesOnly transaction related expenses are incurred. Click here to learn more.It includes several charges: expense ratio (covers admin-related expenses and fund manager fees), exit load, redemption fees, etc.

    Conclusion

    stock vs mutual funds

    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.

    Further, click here to explore all the different investment options!

    S.NO.Check Out These Interesting Posts You Might Enjoy!
    1Mahindra & Mahindra vs Tata Motors: Which is Better?
    2Bank of Baroda vs SBI Bank: Which is Better?
    3PNB Vs Bank of Baroda: Which is Better?
    4MRF vs Apollo Tyres: Which is Better?
    5Bank of Baroda Vs Canara Bank: Which is Better?

    Frequently Answered Questions (FAQs)

    1. What is the full form of SIP?

      SIP stands for Systematic Investment Plan.

    2. Which is better? Stock SIP or Mutual fund SIP?

      It depends on individual financial goals and preferences.

    3. How many stocks can you choose when doing Stock SIP?

      You can start SIP in as many stocks as you want. However, in a well diversified portfolio, atleast 30 stocks are suggested.

    4. Does SIP in stocks has higher risk than SIP in Mutual Funds?

      Yes. SIP in stocks is comparatively riskier.

    5. What is the minimum amount of SIP required to invest in Mutual Funds?

      SIP in a mutual fund starts from as low as INR 100.

  • What Are The Challenges Traders Face When Trading In The Stock Market?

    What Are The Challenges Traders Face When Trading In The Stock Market?

    The stock market is dynamic, and traders face a range of challenges even though the Indian market carries unique characteristics that help them function accurately. The market offers an opportunity to earn higher returns, but with some bitter challenges. Traders should be aware of such challenges.

    Difficulties are common in a country like India, where financial literacy is 27%, implying that only one out of every five people understands finances and how to manage them. People in India trade not only to manage their finances but also because they are afraid of missing out. Investors and traders who are aware of market risks do not attempt to build curated portfolios based on their risk tolerance; instead, they invest in a basket of stocks with an overexposure to micro-cap companies for quick gains.

    In this blog, we shall be discussing the biggest challenges that traders face while trading in the Indian markets.

    What Are The Challenges Traders Face

    Challenges in the stock market can be classified into three main categories:

    1. Market-related challenges
    2. Regulatory challenges
    3. Technical challenges

    Below is a detailed explanation of these three challenges.

    Market risk
    1. Volatility in the stock market
      We all know that markets, be they Indian or global, can be highly volatile and fluctuating. These fluctuations are unpredictable and can be rapid, thereby creating a risk for intra-day as well as positional traders.
    2. Lack of Liquidity
      Some stocks have lower volumes when compared to other stocks, which makes it difficult for the trader to create a position in such stocks at the desired prices.
    3. Asymmetric Information
      Traders in India compete in an environment where information is skewed. The flow of information in the Indian market is asymmetric, meaning that there is an imbalance in the information that the buyer and the seller have. Institutional traders and retail traders may not have equal access to market-moving information, which can create disparities in trading strategies.

    Regulatory Challenges

    Regulatory challenges
    1. Complex Framework
      The regulatory framework of the Indian stock market is complex and can be challenging to comply with, and this includes regulations from SEBI (Securities & Exchange Board of India). Although SEBI has been doing a really good job protecting market participants.
    2. High Transaction Cost
      Costs such as brokerage and security transaction tax (STT) are generally high, especially in the case of derivatives trading, which can significantly impact the realised profit. Check out our blog on different types of charges in online trading.
    3. Compliance
      Traders need to be aware of tax regulations, including capital gains tax, and ensure proper compliance. Tax implications can hamper trading decisions and profitability.
    4. Limit Imposed on Foreign Investments
      International investors or traders may find it difficult to invest in Indian businesses because of certain restrictions imposed by the RBI. The upper limit of overall investment for FII (Foreign Institutional Investors) in any particular Indian company is 10%, subject to the overall limit of 24% on investments by all FIIs and NRIs (Non-Resident Indian). It can only be changed if suggested by the concerned authority.

    Technology-based Challenges

    technology and framework worth.
    1. Internet issues
      It becomes challenging for people who reside in rural areas to trade. Connectivity issues can disrupt trading during market hours and lead to unnecessary delays in the execution of trades. At times, advanced trading platforms might not be accessible to these traders.
    2. Cybercrime
      Cybersecurity threats, such as hacking and fraud, are a concern for online traders since these are very common.
    3. Broker-related tech issues
      At times, while trading in the stock market, the trading platforms may not function smoothly, and trades get stuck in between, which could result in losses for the traders. Even the most tech-savvy brokers in India are not immune to this.

    Read Also: Trading For Beginners: 5 Things Every Trader Should Know

    A few other difficulties that a trader can face while buying or selling in the Indian stock market.

    Accessing Data and Discrepancy 
    1. The psychological aspect of trading is that people unwillingly involve themselves in emotional trading. This happens because of a lack of discipline and proper education. They don’t make logical and informed trading decisions, and then eventually they are trapped in the wrong trades.
    2. Due to a lack of information and literacy in India, traders frequently rely on advice and tips given to them by others. This could be disastrous because it is easy to follow others, but for managing and exiting on time, your own expertise is needed.
    3. It is difficult for traders to trade in the market if they do not analyze the risks involved and do not practice proper risk management.

    Also, check out our blog- Top 10 Highest Leverage Brokers in India

    Conclusion

    Addressing the Risk Factors

    To conclude, trading and investments in the Indian stock market are rewarding but still carry their own set of risks. If you want to avoid such risks, do proper research and align it with your investments. Start trading with a small amount and increase the capital invested gradually over time.

    Remember that trading is a zero-sum game, which means that your loss is someone else’s gain or vice versa. Even after gaining a wealth of knowledge, proper execution, risk management, patience, and perseverance are required. Despite these challenges, the Indian market provides traders with appealing opportunities.

    FAQs (Frequently Answered Questions)

    1. Are there psychology-related challenges in India?

      Yes, traders in India do trade with emotions like fear and greed.

    2. How do global market conditions pose a challenge to the Indian economy?

      Various economic conditions and geopolitical events can affect the Indian market.

    3. Is liquidity the same across sectors?

      No, liquidity varies across different instruments because of various factors involved in it.

    4. Who frames the regulations of the stock market in India?

      SEBI (Securities & Exchange Board of India) regulates Indian stock market.

    5. Can broker-related technical risk be eliminated?

      One can reduce this risk to a certain extent by opening accounts with other brokers.

  • Value Investing Vs Intraday Trading: Which Is More Profitable?

    Value Investing Vs Intraday Trading: Which Is More Profitable?

    Value Investing Vs Intraday Trading

    Value investing and Intraday trading are two different aspects of the stock market. Both of them carry their own set of characteristics and challenges. In today’s blog, we bring you an in-depth analysis of these concepts. If you are the one who is always confused about which is better for you, explore our blog to get answers to all your questions.

    What is Value Investing?

    value investing

    Value investing is an investment strategy that involves buying securities at a price lower than their intrinsic value with the purpose of holding them for an extended period, often years or decades. The main objective of value investing is to create wealth over time. Value investors believe that the market does react to good and bad news that results in movements in stock price, but these movements are temporary and do not leave any impact in the long run. Value investors majorly focus on fundamental analysis of the company, such as earnings quality, dividends, and financial statements. They are of the view that the market will recognize the true worth of the stocks that are trading below their intrinsic value over time.

    Rakesh Jhunjhunwala and Dolly Khanna are the biggest examples of value investors in India.

    Read Also: Top 10 Intraday Trading Strategies & Tips for Beginners

    Key features of Value Investing

    Margin of Safety

    Long-term investors seek to purchase stocks at a discount to their intrinsic value, creating a margin of safety and avoiding potential losses.

    Long-Term Perspective

    Value investors typically purchase stocks with the intention of holding them for extended periods of time, which calls for patience and self-control.

    Contrary Approach

    Value investors often take a contrarian approach. This approach includes doing the reverse of what the majority is doing. Contrarian investors believe that the majority of the participants act in a herd because of fear, greed, etc., which results in securities being temporarily overvalued or undervalued. This approach can be highly rewarding, but keep in mind that it can be a risky one, which may result in hefty losses.

    Interesting Fact: Warren Buffett is a famous Contrarian Investor

    Advantages of Value Investing

    pros of value investing

    Better Returns

    Value investing has historically achieved superior and stable returns when compared to other investing strategies. By buying undervalued stocks and waiting for them to generate returns, long-term investors can benefit from the market’s eventual recognition of the company’s true value.

    Lesser Risk

    The margin of safety reduces the risk of the investors and protects them from losses if the valuation of the stock that they are holding is slightly off.

    Disciplined Approach

    Value investing focuses on a long-term perspective and encourages a disciplined and planned approach to investment, preventing investors from making impulsive decisions.

    Challenges of Value Investing

    1. Identifying undervalued stock is a challenging task, as analyzing the financials of the company and calculating its true value can be complex.
    2. A contrarian approach to value investing can sometimes lead to holding stocks that are unpopular with the market and will not be able to generate potential gains over time. Not all the stocks trading at a seemingly low valuation are good investment opportunities.
    3. Timing the market, i.e., identifying the right time to enter the market or buy a stock, can be challenging.
    4. Psychological biases, such as overconfidence or anchoring, can influence investors and lead to poor decision-making.
    5. Value investors may face challenges when industries evolve and companies fail to adapt to new trends or technologies, leading to value destruction.

    What is Intraday Trading?

    intraday trading

    Intra-day trading is a financial approach where stocks, currencies, and commodities are bought and sold within the same trading day. Intra-day traders aim to earn profits from very short-term price fluctuations in the market, and they do not carry their positions overnight.

    Key facts about Intra-day trading

    1. Intraday trading is carried out on short-time frames on technical charts like 1 minute, 5 minutes, 15 minutes, 1 hour, and 4 hours.
    2. Intraday traders design their strategies based on technical analysis. (Read our blog, Best Options Trading Chart Patterns, to know more about technical analysis)
    3. Intraday traders get an option to leverage their trading positions. This allows them to buy more stocks with a lesser amount of capital. However, do remember that leverage is a double-edged sword.
    4. Intra-day traders are generally quick decision-makers because market timing and executions are crucial factors for them.
    5. Intra-day trading can be speculative since traders try to catch short-term market movements.

    Benefits of Intra-day Trading

    pros of intraday trading

    Quick profits

    Intraday traders can earn quick profits within a single trading day because they aim for short-term price movements, which involve multiple trades in a day. At the end of the day, these multiple small trades can significantly influence the overall P&L.

    Lesser risks.

    Intraday traders do not carry positions overnight and square off their positions within the same trading day. This eliminates the risk of gap-up and gap-down openings, as well as random market news.

    Leverage

    Intraday traders can significantly benefit from taking high leverage in intra-day trades, which can significantly influence their P&L. However, keep in mind that leverage is a double-edged sword, and it is advisable to trade with less leverage while carrying out intra-day trades.

    Challenges of Intraday Trading

    1. Excessive market volatility can lead to unpredictable swings, thereby causing losses and increasing market risks.
    2. Day traders can face constant fear of loss of capital, and the mental pressure to make instant decisions can be stressful. Fear and greed can lead to impulsive decisions.
    3. Intraday traders can end up paying higher transaction costs (brokerage, STT, stamp duty, etc.) because they might execute multiple trades on the same day.
    4. Day traders get a limited time window to execute trades, and they may face technological issues since they rely heavily on real-time data provided by the broker.
    5. Sticking to your strategy in real-time markets can be a tough task since it requires a lot of patience and discipline.

    Value Investing vs Intra-day Trading

    Since both come with their own merits and demerits, choose what aligns best with your financial goals and investment horizon. We have created a table of differences for you. Let’s have a look:

    BasisValue InvestingIntra-day Trading
    Time HorizonLong-term (generally >5 years)Within a day
    Investment PhilosophyMajor focus on fundamental analysisIntra-day traders focus on technical analysis
    Stock SelectionUndervalued stocksHighly liquid and volatile stocks are preferred
    RiskValue investing generally carries lower risk.Carries higher risk than Value investing

    Read Also: Difference Between Intraday Trading and Delivery Trading

    Conclusion

    conclusion

    To wrap it up, it completely depends on the individual preferences, risk tolerance, and time that he or she is willing to give. Value investing is considered suitable for long-term investors, while intraday trading is for short-term traders who are looking to make quick bucks. Keep in mind that intraday trading is a zero-sum game, while value investing is a positive-sum game. Both strategies carry inherent risks, and careful evaluation is required.

    Frequently Answered Questions (FAQs)

    1. Which is riskier? Value investing or intra-day trading

      Intraday trading is considered riskier.

    2. Is it suggested for beginners to be involved in intraday trading?

      No, intra-day is speculative in nature and is generally not suggested to beginners.

    3. Which investment approach uses fundamental analysis?

      Value investing uses fundamental analysis and reading financial statements.

    4. Mention two value investors in India.

      Rakesh Jhunjhunwala and Dolly Khanna.

    5. What is the intrinsic value of a stock?

      The inherent value or true worth of the stock is known as intrinsic value.

  • Mutual Fund vs ETF. Are They Same Or Different?

    Mutual Fund vs ETF. Are They Same Or Different?

    Mutual Funds and Exchange Trade Funds (ETFs) are both pooled investments that take money from multiple investors and then invest in several instruments: Equity, Bonds, Commodities, etc. However, there are a few differences between them. Let’s find out those differences!

    Mutual Fund Vs ETF

    What are Mutual Funds?

    Mutual funds collect money from numerous investors to invest in a diversified portfolio of stocks, bonds, or other assets. These funds are managed and curated by professional fund managers and hence become suitable for investors who have less time and expertise to manage their portfolios. When you invest in mutual funds, NAV (Net asset value) is allotted to you which reflects the net value of the assets that the fund manager chooses to invest your money.

    Mutual funds in India are established in the form of a trust under the Indian Trust Act of 1882, in accordance with SEBI (Mutual Funds) Regulations, 1996.

    Mutual funds are considered ideal for investors who do not have sufficient knowledge of investing in stock markets and wish to start their financial journey with a small amount since these funds offer investors a wide variety of investment options like shares, bonds, debentures, real estate, and money market instruments.

    Check out our blog on Mutual Funds!

    Types of Mutual Funds

    Cheat sheet - Major types of Mutual funds

    1.  On the basis of organizational structure

    • Open-ended funds

    These funds issue shares and redeem existing shares on a daily basis. The NAV of the underlying assets determines the price of this fund.

    • Closed-ended Funds

    These funds have a fixed number of shares that are issued only once and then are traded on the exchange until maturity. Close-ended funds have a fixed maturity date.

    • Interval Funds

    These funds are a mixture of open-ended and closed-ended funds that allow investors to purchase & redeem their shares at certain intervals. The transaction period in interval funds has to be a minimum of 2 days, and there should be at least a 15-day gap between the two transaction periods.

     2.  On the basis of portfolio management

    • Active Funds

    An active fund is a fund where the fund manager manages the portfolio, i.e., he decides what needs to be sold, bought, and held in the portfolio.

    • Passive Funds

    Passive funds, also known as index funds, are investment funds that are designed to replicate the performance of a specific index. They keep track of the benchmark returns.

     3. On the basis of asset class

    • Equity funds

    These funds invest primarily in stocks or equities and come with higher volatility. For example, large-cap funds, mid-cap funds, and small-cap funds.

    • Debt Funds

    These funds invest in fixed-income securities such as government bonds and carry lower risk when compared to regular equity funds.

    Check out our blog on Debt Mutual Funds

    • Hybrid funds

    In these funds, the capital of the investor is allocated both in equity and debt funds and the fund manager tries to create a balance between risk and return.

    Advantages of investing in Mutual fund

    Investing in mutual funds comes with certain risks and advantages. Below are some key advantages that mutual funds offer:

    1. Mutual funds offer investors a diversified portfolio of different asset classes – Large cap, Small Cap, Flexi Cap, etc.
    2. Active Mutual funds are professionally managed funds with skills and expertise.
    3. Mutual funds are an affordable way to start an investment journey because the initial investment amount is relatively low.
    4. Liquidity – The lock-in period is generally low to none in Mutual funds.
    5. Tax benefits are also available to the investors investing in ELSS funds.

    Risk of Investing in Mutual Funds

    1. Mutual funds are subject to market risks, and returns are not guaranteed.
    2. The value of your investments may fluctuate depending upon the market movements.
    3. Market-related risk: The inability of a mutual fund to sell securities held in the portfolio could result in potential losses to the scheme.
    4. Changes in interest rates and economic conditions can significantly affect the prices of securities held by Mutual Funds.

    Read Also: SIP in Stocks vs SIP in Mutual funds?

    What is ETF?

    What are Exchange Traded Funds

    ETF stands for Exchange-traded funds. It is a type of investment option similar to Mutual Funds. ETFs invest in a basket of securities such as stocks, bonds, and other assets. Unlike mutual funds, ETFs are traded on stock exchanges just like any individual stock, and an investor can buy or sell them during market hours at certain prices. These funds track indices such as CNX NIFTY. ETFs generally carry a low expense ratio because of lower administrative costs. (Read more about expense ratios in our blog Asset Under Management).

    To trade in ETFs, a de-mat account is required, and usual brokerage charges and STT would apply. When investing in ETFs, dividends from a stock that is in the ETF basket are also reinvested.

    ETF shares are created or redeemed through a unique in-kind process. Authorized participants or Market Makers (typically large institutional investors) can exchange a basket of securities for ETF shares or vice versa, helping to keep the ETF’s market price close to its Net Asset Value (NAV).

    Merits of investing in ETFs

    1. ETFs offer diversification because they invest in a basket of securities. Investors can customize their portfolios as per their choice.
    2. ETFs usually carry a lower expense ratio than mutual funds.
    3. ETFs are tax-efficient. They are designed and structured to minimize capital gains distributions so that your tax liability is reduced to an extent.
    4. ETFs can be easily bought and sold.

    Demerits of investing in ETFs

    1. ETFs may have tracking error which is the difference between the ETFs performance and the performance of the underlying asset. Various factors such as expense ratio, brokerage, and liquidity of the underlying securities can cause this.
    2. ETFs offer less diversification as compared to Mutual Funds.
    3. ETFs with low trading volume can be more volatile because of high bid-ask spreads, which is the difference between the price at which you can buy an ETF and the price at which you can sell it.

    Pro Tip: Always check the NAV of the ETFs before investing because ETFs generally trade at a premium.

    Read Also: Types of Mutual Funds in India

    Mutual fund vs. ETF: Which one is right for you?

    Confused! Explore this table to have a better understanding.

    BasisMutual FundsETFs
    StructureManaged by investment firms and are priced once per day at the NAVETFs are tracked by index sector or asset class.
    TradingBought and sold through the fund companyTraded on stock exchanges just like any other individual stock.
    ManagementMutual Funds can either be actively managed or passively managed.Most of the ETFs are passively managed, but there are actively managed ETFs as well.
    FeesMutual funds carry management fees, sales loads, and expense ratiosETFs do not carry any sales load, but you need to pay STT, brokerage, and expense ratios while trading in ETFs.

    Conclusion

    To wrap it up, ETFs and Mutual Funds are both pooled investments. Eventually, the choice between a mutual fund and an ETF depends on the preferences of the investor, his investment strategy, and risk tolerance. Some investors may prefer the ease of trading and lower costs associated with ETFs, while others may value the professional management and simplicity of mutual funds.

    S.NO.Check Out These Interesting Posts You Might Enjoy!
    1Mutual Fund vs ETF. Are They Same Or Different?
    2Best ETFs in India to Invest
    3ETF vs Stock – Which One is the Better Investment Option?
    4Gold ETF vs Gold Mutual Fund: Differences and Similarities
    5ETF vs Index Fund: Key Differences You Must Know

    Frequently Answered Questions (FAQs)

    1. Which mutual fund offers investors with tax benefits?

      ELSS (Equity Linked Savings Scheme) funds provide investors with tax benefits under Section 80 (C) of the Income Tax Act.

    2. What does ETF stand for?

      ETF stands for Exchange Traded Funds.

    3. Are ETF and mutual Funds the same?

      ETFs are traded like individual stocks, and mutual funds can be bought and sold through fund houses.

    4. ETFs are actively managed or passively managed?

      Most of the ETFs are passively managed, but there are actively managed ETFs as well.

    5. Where do money-market funds invest?

      Money market funds invest in highly liquid instruments like T-bills and commercial papers.

  • What should you do if your stock portfolio is stuck in losses?

    What should you do if your stock portfolio is stuck in losses?

    What Should You Do If Your Stock Portfolio Is Stuck In Losses

    You must be tired of seeing those red figures whenever you open your portfolio. We understand that if your portfolio is stuck in losses, it can be a challenging situation. You need to go through the stocks and re-evaluate the strategies. It is necessary to analyse your portfolio with a level-headed mindset and consider different factors before reaching any decision. You need not worry because we got you covered and in today’s blog, we will be exploring key steps to help you navigate the losses and work towards a more strategic approach.

    Possible causes of losses in your portfolio

    Possible causes of losses in your portfolio

    Below listed are some of the causes that can land you in losses.

    1. Volatile Markets
    2. Focusing on a specific sector
    3. Wrong Entry and Exit
    4. Leveraged Positions
    5. Psychological Reasons
    6. Poor Selection of Stocks

    Let’s understand above mentioned reasons in depth:

    Volatile Markets

    Stock market fluctuations are normal and any sort of volatility in the short-term can lead to unrealised losses. Economic uncertainties like global economic conditions and geo-political events can contribute to volatility in the market. Therefore, if you are a short-term investor you need to be careful about the economic activities and global events.

    Focus on a specific sector

    Warren Buffet once said, “Do not keep all your eggs in one basket”. Hence, concentrating on one sector can expose your portfolio to sector-specific risks. Any kind of challenge in that particular sector can impact the performance of the stocks of that particular sector.

    Wrong Entry and Exit

    A lack of technical analysis and bad trading decisions can lead to poor timing of entry in the market. Buying stocks when they are at their highs can affect the overall performance of your portfolio.

    Leveraged positions

    If you do margin trading chances are likely that you will end up amplifying your losses because any kind of trend reversal in the market can worsen your situation and you will be forced to liquidate your portfolio at unfavourable prices.

    Psychological Reasons

    Herd mentalities won’t work when trading in the stock market. If you are someone who frequently invests or trades on tips and bets on random stocks you will lose all your capital because people can have different financial goals and risk appetite.

    Poor selection of stocks

    It is important to analyse any stock technically and fundamentally before investing. Without proper study, stock selection can be tough and can impact your portfolio.

    Read Also: 10 Top Investors In India And Their Portfolios

    How to deal with red portfolio

    how to recover losses

    Let’s discuss the ways through which you can manage the losses and turn your portfolio into green.

    Revaluation

    Analyse the reason you initially invested in the losing stock. Are there any kind of fundamental changes since then? We say that candlestick charts are astrological graphs of any stock. Go through these charts and try to know the current trend of that stock. The initial reason for investment should still align with your long-term investment goals. If you find anything fishy then consider exiting the stock.

    Long-term perspective

    If you are a long-run investor and revisit your portfolio every now and then, it may lead to disappointments because those red figures might bother you. As company goes through several phases, it might be the case that your stock is in red now because of temporary reasons. If company’s philosophy is aligned and management is good then stocks often generate good returns to Investors but yes that takes patience. Since patience is the key to successful investing in the stock market you need to wait for the stock to recover from the losses.

    Some wise person once said “Checking your portfolio daily is like putting up a web-cam in the forest to see if the trees are growing.”

    Portfolio-review

    Review your portfolio periodically say once every quarter and keep a check on your investment strategies. Consider rebalancing your portfolio quarterly, half-yearly or annually according to your current financial situation and market conditions.

    Follow Stop-loss

    Strict stop-loss is a prudent decision. Learn to respect the stop loss. If there is a sudden fall in the margin or ratios of the stock, consider selling and reallocating the funds. Stop loss is designed to limit an investor’s loss in a position. There is no point of staying investing in a stock that has underperformed over the years and is no longer giving you returns.

    Invest practically and not emotionally.

    Risk-Appetite

    Reassess your risk tolerance. If the losses are causing significant stress or anxiety, it may be an indication that your risk tolerance needs adjustment. Your portfolio should match your comfort level and your goal of investments.

    Diversification

    Do not concentrate your investment amount on an individual stock or in stocks of the same sector. Diversify your portfolio in order to reduce stock specific and sector specific risks. This can help you in mitigating the losses because not all the stocks in your portfolio will give you losses.

    Exit your mistakes in Bull Market

    Go through the overall market trends including the global economy. Sometimes market gives golden opportunities to investors to exit their mistakes, as in Bull run, most of the stocks do well irrespective of their fundamentals.

    “No stock in an uptrend has ever gone bankrupt.” – Walter Deemer

    Advice from professionals and experience.

    If you are a newbie, you must understand the fact that a journey in the stock market is a roller coaster ride. If you are not able to navigate your losses and diversify your portfolio, go for professional advice. An experienced person can give market insights and help you make investment decisions as per your risk and financial goals

    Invest at regular intervals

    One of the best ways to avoid losses and reduce the risk is regular investment. We have already discussed about selling the investments if they are not generating returns, but we also want to make you aware of the art of averaging the stocks. Falling markets give us losses and we all know this. But instead of panic selling, you can choose take benefit of downtrend and average the stock if it’s fundamentally strong.

    Also, check out the blog on ATR.

    Note: Averaging of stocks is defined as buying more shares of that stock over time to lower the average buy price of the stock provided the price of the share is trading below your initial buy price.

    Conclusion

    conclusion

    It is important to be mindful of your investments because there is no guaranteed technique to escape losses in the stock market. All an investor can do to protect his/her portfolio and minimise losses is diversification of investments in different asset classes including equities and debt. You should know that only an optimistic approach will work well with your developed strategies throughout your investment journey. The stock market inherently carries risk and it’s unavoidable. Any investor should make decisions based on his/her own rationale. You just need to be consistent and patient and the market will surely reward you with profits.

    The decision is tough but will be worth it!

    Frequently Asked Questions (FAQs)

    1. If your portfolio is stuck in losses what should be the first step?

      The first step should be analysing the reasons for the losses – It can be either stock specific (e.g. Yes Bank) or market specific (e.g. Covid-19). Force selling in a market specific scenario is not ideal.

    2. Should an investor consider selling stock immediately once the portfolio turns red?

      No, by doing so s/he will be selling the stocks in a panic state. Sit back and analyze the technical and fundamentals of the stock. Always take the decision with a clear mind.

    3. How can diversification help you minimise your risk?

      Diversifying your portfolio can help you in eliminating the stock specific or sector specific risks.

    4. Can professional advice help you reduce losses?

      Yes, professionals can help you making an informed decision.

    5. How to control emotions when trading in the stock market?

      When trading in the stock market you should be disciplined. Further, educate yourself so that you can make better investment decisions and formulate profitable strategies. Always remember that Emotional biases are easier to understand but difficult to overcome.

  • FD (Fixed Deposit) vs Stocks: Which is the better investment option?

    FD (Fixed Deposit) vs Stocks: Which is the better investment option?

    Where to invest? How much to invest? Should I go with investing in stocks, or should I go with bank fixed deposits?

    These questions commonly arise whenever you have an ample amount of money and you are economical. In this blog, we will explore the difference between investing in stocks and fixed deposits. Before we learn about the key differences between stocks and fixed deposits, let’s have some basic ideas about financial planning. What is financial planning, and why do we need financial planning?

    Financial Planning means channelling one’s income into consumption and savings, where consumption is defined as the unavoidable expenditure incurred by an individual on his basic needs, and the residual amount after spending is known as savings. The savings can be used to meet the financial goals.

    Types of Saving Instruments

    In a country like India, saving instruments can be divided into two parts

    1. Traditional Savings instrument
    2. Investments

    Most people in India generally opt for traditional savings instruments because there is a lack of financial literacy. Some of the most common traditional methods to save are listed below.

    • Fixed deposits
    • Recurring Deposits
    • Post Office

    Some of the most widely used new-age investment options apart from traditional saving instruments are

    • Stocks
    • Mutual Funds
    • Commodities  

    Now, let us dig deep into the concept of the most used methods of traditional and modern investing i.e., Fixed Deposits and Stocks.

    What are fixed deposits?

    FD

    Let’s make it easy, simplified and crisp with a short example.

    Suppose, you received a Diwali Bonus of Rs.50000, and instead of buying something expensive, you decided to go for a Fixed Deposit. Now you will visit your nearest bank branch and will deposit your money to earn some amount of interest and will just sit back for some years. You will reach out to the bank once again when your Fixed Deposit matures to get your principal amount as well as the interest that you have earned over the years.

    Therefore we can say that fixed deposit (FD) is a tenured deposit account provided by banks or NBFCs (Non-banking financial companies ) which provides investors with a higher interest rate than a regular savings account until the given maturity date. Investment in fixed deposits is considered a risk-free investment.   

    Merits & Demerits of Investing into FDs

    There are certain merits and demerits of saving your money in FDs

    Merits of Investing in Fixed Deposit

    1.     Guaranteed Rate of Interest

    2.     Easy to Monitor

    3.     Tax Benefits

    4.     Loan Against FD

    5.     Flexible Period

    6.     Better option for senior citizens

    Demerits of Fixed Deposits.

    1.     May not beat inflation

    2.     Lower rate of return

    3.     Penalty on pre-mature withdrawal.

    4.     Lack of re-investment opportunity.

    Taxation of Fixed Deposits in India (Example):

    In India, the interest income earned from fixed deposits is subject to taxation under the Income Tax Act. Here’s a simplified example to explain how FD interest is taxed. Suppose Mr. Y has a bank FD of Rs.1 lakh and as per the current rate he is earning an interest 6.5% per annum on his FD, which amounts to 6500 (6.5% of 1 lakh). Now he is liable to pay tax on 6500 as per his income slab. By now, you must have understood the basics of Fixed Deposits. Now let’s throw some light on the most discussed yet so undervalued concept of investing i.e., stocks

    What do you mean by investing in stocks?

    STOCK MARKET

    A stock, also known as equity, represents a part of an individual’s ownership 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. Many investors choose to build a diversified portfolio of stocks to spread their risk. Diversification involves owning a basket of stocks from different sectors to reduce the impact of poor performance in any one stock. Stocks can be diversified into large-cap, mid-cap and small-cap companies

    Large-cap 

    Companies are generally growth-oriented companies that are considered safer while investing. They are less risky and give lower returns than other companies since risk and reward in the stock market go hand in hand.

    Mid Cap 

    Companies possess higher risk when compared with large-cap companies and they are suggested for investors who are well-versed with the concept and idea of investing in stocks.

    Small cap 

    Companies carry higher risk since they are start-ups, having good potential to perform in longer investment horizon.

    Read Also: Which is Better: Fixed Deposit or Residential Property Investment

    From where can we buy or sell stocks?

    Stocks are bought and sold on stock exchanges, organized marketplaces where buyers and sellers join together to trade. Stock exchanges in India are NSE and BSE. If we talk about the returns of the stock market, they are highly volatile and are dependent on the performance of the market. If you are planning to invest in stocks from the point of view of the short term, then be ready for the volatility you might face. Still, if you stay invested for a longer horizon, the market will surely reward you for your patience with outstanding higher returns, which can fight inflation.

    Taxation of Equity in India

    Just like taxation on FDs, stocks are also subject to tax deductions. The taxation on equity is divided into two parts, the first being the short-term capital gain and the second being the long-term capital gain.

    1. Short-Term Capital Gain  

    The realized gain within 365 days of investing is considered short-term and taxable at 15%.

    1. Long-Term Capital Gain 

    The realized gain after 365 days of investing is considered long-term and is taxable at 10% over and above 1 Lakh.

    Merits & Demerits of Stocks

    How to become aware during Stock marketplace investment?

    Now, let’s discuss the merits and demerits of investing in stocks.

    Merits of investing in stocks

    1.     Inflation rate adjusted Returns

    2.     Dividend income

    3.     Liquidity

    4.     Tax benefits

    5.     Wealth creation

    Demerits of investing in stocks

    1.     Volatility of markets

    2.     Higher Risk of Loss

    3.     Brokerage

    In India, 3% of the current population is investing in stock markets and we hope that with our blogs we will be able to make our upcoming population financially more aware.

    After having an overview of the basics of Fixed Deposits and stocks.

    We can now easily create a table of differences between stocks and FDs.

    Basis of DifferenceFixed DepositStocks
    LiquidityIt has very little liquidity as compared to stocks.Stocks have high liquidity.
    RiskInvestment in Fixed Deposit is considered risk-free.Investment in stocks possesses higher risk.
    Investment HorizonPre-decided investment horizon.Suggested for individuals having high-risk appetites.
    Rate of Interest (Return)GuaranteedMarket Linked
    TaxationInterest is fully taxable.Long
    ExpensesNo expensesTransaction Cost
    Inflation RateReturns of FD may or may not beat inflation.It offers inflation-adjusted returns.
    Duration of investmentGenerally suggested for the shorter horizon.It is suggested for individuals having long-term investment horizons.

    Read Also: A Guide To Fixed Deposits: Exploring Types And Interest Rates

    Conclusion

    CONCLUSION

    Therefore, it is always suggested to select between the two as per your investment objective, financial goal and risk appetite. Eventually, there is no one-size-fits-all answer, and the optimal choice depends on your preferences. Do not forget to consult a financial planner to tailor your investment strategy if you are confused.

    Frequently Answered Questions (FAQs)

    1. Which is considered safer, Fixed deposits or stocks?

      Fixed deposits are generally considered safer as they provide a fixed return.

    2. Which investment option offers higher returns between stocks and FDs?

      Stocks offer higher returns than FDs.

    3. Who provides FDs?

      Banks and Non-Banking Financial Institutions provide FDs.

    4. What is STCG in stocks?

      STCG in stocks stands for short-term capital gains, which are 15% of your realized gains.

    5. Who decides the interest rate on FDs?

      Banks and NBFCs decide interest rates on FDs, which vary from bank to bank.

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