With reference to the SEBI Circular “SEBI/HO/MIRSD/DoP/P/CIR/2022/46” dated April 06, 2022, wherein SEBI has advised KRAs to implement new guidelines to validate the records of clients (existing as well as new clients) whose KYC has been completed using Aadhaar as an Officially Valid Document (OVD).

As a part of the validation process, KRAs shall validate the following details:

1. Aadhaar through Unique Identification Authority of India (UIDAI) authentication / verification mechanism.
2. Mobile number / Email ID using OTP validation (only in cases where mobile number and e-mail ID provided by client are not seeded with Aadhar)
3. PAN using Income Tax Database.

As per the information received from the KRAs through RTAs, wherever the Mobile number and Email ID could not be verified, for such clients KYC status against the PAN will be kept ‘ON HOLD’ with effect from August 18, 2023.

Once the KYC gets on-hold, the clients can refer the below links to validate the KYC as per the associated KRA -

NDML KRA - Click Here

CVL KRA - Click Here

KARVY KRA - Click Here

DOTEX KRA - Click Here

CAMS KRA - Click Here

As per SEBI regulations, investors who are holding mutual fund units have the choice of either providing the Nomination or Opt out of Nomination, on or before September 30, 2023, failing which the folios shall be frozen for debits/redemption

CAMS Nomination Opt-in/Opt-out

1. Visit CAMS Online here
2. Enter your PAN
3. Verify via email/mobile (NRI Investors / Resident Investors traveling outside India, should verify via email)
4. Choose your mutual fund
5. Choose investments with Mode of Holding
6. Choose Register Nominee - All folios for which nominee details are not entered will appear here. If you do not wish to provide nominee details, you can opt out by selecting Nomination opt-out as well
   

Kfintech Nomination Opt-in/Opt-Out

1. Visit KFintech here
2. Enter the details - PAN, Mode of Holding, Select Folio Option, Email/Mobile
3. Verify with OTP
4. Select your fund and enter the nominee name, alternatively if you want you can otp out as well by selecting OTP out
5. Another OTP verification will be done to confirm the changes
   

Offline:
If you wish to go by offline mode, you can download the offline forms from below and submit it to the CAMS/Kfintech office:

1. CAMS form
2. Kfintech:  Nomination Opt Out form. ,   Nomination form

“The markets are too volatile this year” is probably the most used statement this year.

Have the markets been like this in the past? A big YES! But at the same time, markets have managed to bounce back each time wiping out short-term losses and reaping exemplary gains for its investors.

How has it worked out in the past?

The following are the major market crashes of Nifty 50 so far.

In each of these instances, though the market has crashed by almost 40% and more, it has managed to recover quickly, especially in the recent cases where the markets have displayed greater resilience.

What are the probable reasons for market volatility since January 2022?

1. Omicron  outbreak – The new variant of covid plunged Indian markets from their all-time high.
2. Russia-Ukraine crisis – The geo-political crisis slowed down global growth and caused supply chain disruptions.
3. High crude oil prices – India imports about 86% of its oil requirements. Hence, high crude oil prices increase India’s import dependency and widen the current account deficit.
4. Record high inflation numbers – The record high inflation numbers in some of the world’s biggest economies like the USA, Germany, and UK have caused huge fears among markets across the world.
5. Prospect of a Recession – A recession is a decline in the GDP growth of an economy with high inflation rates causing a significant rise in prices of goods and services, thereby affecting the purchasing power of a common individual.

What should investors do about it?

The markets have always managed to remain strong in the long run. The earnings data and growth potential of Indian companies would determine the strength of our economy.

Moreover, the Indian market has relatively remained stable and has lower drawdown levels compared to its global counterparts. Hence, as a long-term investor, it is essential to

1. Avoid checking investment returns on a daily basis
2. Be consistent with SIPs irrespective of the market condition
3. Add lumpsums during major drops
4. Avoid trying to time the market
5. Maintain an emergency reserve

Get in touch with your investment manager to benefit from active management of your portfolio during all market phases.

Motilal Oswal AMC has launched an NFO, which is open for subscription from Sept 26th, 2022, and closes on Oct 7th, 2022.

Investment Objective: To generate wealth over the long term, suitable for investors having a high-risk appetite who are comfortable with volatility in the short term.

Investment Strategy: The fund deploys a passive approach by investing in Exchange Traded Funds(ETFs). As the name suggests, the fund aims to invest in units of Gold ETFs and  Silver ETFs to capture the market value of the precious metals.

Fund Manager: Abhiroop Mukherjee

Benchmark: LBMA Price of Gold and Silver

Fund Management Process:

1. The fund follows passive management with the expectation of replicating the growth of Gold and Silver in electronic form over the long term.
2. The investment universe contains only Gold and Silver at all points in time.
3. There is higher allocation towards gold as it has higher economic value, is more liquid, and is relatively more stable than silver.
4. The portfolio is constructed and managed through the following process:

• Starting allocation of the portfolio is kept at 70% towards gold and 30% towards silver.
• The maximum allocation amount for gold at any point in time is 90% of the entire portfolio.
• The portfolio is reviewed every quarter as the market value of commodities keeps changing.
• There is no active re-balancing process.

Opportunity:

Gold, one of the most precious metals, is an excellent hedge against economic uncertainties, pandemics, and global recession. On the other hand, silver derives value from its vast demand in the modern world for semiconductor manufacturing and facilitates the EV process.

Gold is relatively more stable, while Silver tends to react more steeply, both on the upside and downside. As a combined product, the volatility can be significantly reduced.

During stressful times, equity markets tend to react negatively and take quite a beating. However, in all the above cases, Gold+Silver has outperformed the stock market domestically and internationally.

Based on our analysis, we have observed the following pros and cons:

Pros:

1. Precious metals have stood the test of time and civilizations as a store of value and exchange.
2. Perfect for Asset Allocation due to inverse relation with Equity.
3. No risk of theft, purity, storage, and making charges making it cost-effective and easily accessible.
4. Essential for diversification and mitigates risk in the portfolio.
5. Gold is a natural hedge against inflation and is considered a safe haven
6. Silver has increasing growth potential thanks to its industrial demand and utility.

Cons:

1. The investment universe is limited to only gold and silver.
2. There has been relatively lower performance than equity in the last five to seven years.
3. The dollar’s growing strength as a world standard has weakened the overall prospects of Gold’s growth in the recent past.
4. Volatility levels can be very high in the short to medium term.

Gold and Silver do not need great introductions as it is most relatable and consumed precious metals since the inception of humankind and civilizations. These commodities have been used for multiple purposes. They have untapped potential as a combination(Gold+Silver), available and easily purchasable as a mutual fund investment product.

It is of utmost importance that the fund is discussed with your financial expert and then ascertain whether it is suitable to invest in. Always read the scheme documents thoroughly before investing.

ICICI Prudential AMC has launched an NFO, which is open for subscription from Sept 22nd, 2022, and closes on October 6th, 2022.

Investment Objective: To generate wealth over the long term, suitable for investors having a high to very high-risk appetite who are comfortable with volatility for prolonged periods.

Investment Strategy: As the name suggests, the fund will adopt a passive approach by investing directly in the index that has the premier automobile stocks in the country. The fund follows an approach that emphasizes the various opportunities present in the automobile segment and aims to replicate the index, expected to participate in the growth of this particular sector.  

Fund Manager: Kayzad Eghlim and Nishit Patel

Benchmark: Nifty Auto TRI

Fund Management Process:

1. The Selection criterion is purely based on the existing stock constitution of the Nifty Auto Index.
2. The Fund will replicate the Index based on the free-float market capitalization.
3. Any changes in the benchmark(Nifty Auto TRI) will automatically reflect in the fund.
4. No single stock can exceed 33% of the portfolio, and the top-3 stocks of the portfolio cumulatively cannot exceed 62%The portfolio is rebalanced semi-annually, typically during September and March.

Opportunity:

The Auto Sector is deeply cyclical. It moves differently and is highly volatile compared to a diversified Index like Nifty 50 or Nifty 500. Since August 2018, and more so after the outbreak of Covid-19, the Auto sector has faced huge losses. Its performance has been dismal, but the last six months have shown that there has been an uptick in the overall growth trajectory, which might signal a long-term revival for this sector.

Multiple factors that are aiding the possible boom in Auto Sector in India:

1. Population and Income - Young working population with increased individual income leads to higher consumption levels.
2. Labour - Abundance in the labor market with skill enrichment coming at a low cost.
3. Research - India accounts for 40% of the $31 Billion of Global Engineering and R&D expenditure.
4. Rise of EV - The EV boom is expected to boost the sales of the Auto Sector in the coming years.
5. Government Initiatives - Atmanirbhar Bharat Abhiyaan focuses on special incentives and packages for promoting Auto Manufacturing.

Based on our analysis, we have observed the following pros and cons:

Pros:

1. No fund manager bias or human intervention at any point in time.
2. Focus is on top auto companies in India like Mahindra & Mahindra, Bajaj Auto, Maruti, Tata Motors, etc, that form a core part in contributing to the growth of the sector and economy as a whole.
3. Since it mirrors the index, the cost is very low.
4. No exit load applicable at the time of redemption.
5. Niche investing approach that focuses purely on the Auto sector boom.

Cons:

1. Lack of diversification due to concentration in one sector(Auto).
2. Susceptible interim periods of underperformance when compared to broader indices like Nifty 50.
3. Extremely cyclical in nature, making it more volatile.
4. The weightage of each stock is directly linked to the index. It cannot be actively modified based on market movements.
5. No scope for active fund management, like taking cash calls during market fluctuations.

The Auto Sector is an integral part of the Indian Stock market as well as the economy of our nation. It currently contributes around 7% to the country's GDP. It is also expected to play a significant role in the EV revolution. Increased demand and positive macroeconomic factors can propel the sector to new heights. However, at the same time, it is highly cyclical. It can lead to severe underperformance in the short run with a lack of active fund management to intervene.

It is of utmost importance that the fund is discussed with your financial expert and then ascertain whether it is suitable to invest in. Always read the scheme documents thoroughly before investing.

Union AMC has launched an NFO, which is now open for subscription from September 1st, 2022, and closes on September 15th, 2022.

Investment Objective: To generate wealth over the long term, suitable for investors having a moderate risk appetite who are comfortable with volatility in the medium term.

Fund Manager: Vinay Paharia and Sanjay Bembalkar

Benchmark: S&P BSE 500 TRI

Features of Union Retirement Fund:

1. Mandatory Lock in 5 years or till retirement age(60), whichever is earlier.
2. More than 65% of the fund's investments will be in Equity.
3. Moderate to Aggressive style of investing to combat and beat inflation.
4. A targeted investment approach to build a separate corpus for retirement.
5. No TDS, taxed based on Long Term Capital Gains on Equity.

Suitability of Union Retirement Fund:

1. Investors with moderate risk appetite and balanced levels of risk capacity.
2. Purely for the long term with no intermittent or immediate requirements.
3. Goal of having a vital source of income after retirement.
4. Committing investments towards retirement with no mixing of other goals.
5. Capital Appreciation approach makes it favorable to build a healthy sum over a longer time frame.
6. To maintain or improve the standard of living post-retirement.

Retirement Funds are an interesting breed of equity mutual funds. It has a mandatory lock-in period to ensure investors do not lose track of their primary goal. However, at the same time, it serves the purpose of wealth accumulation by compounding over a longer time frame.

It is of utmost importance to read the scheme documents fully before investing. Get in touch with your financial expert to know more!

Small-cap mutual funds, more often known for their high risk and extreme levels of volatility, deliver profoundly high returns when invested for a longer time frame. They may be small companies in market capitalization, but performance is extra large!

What is a Small-cap mutual fund?

A fund with a minimum of 65% of its total investments in stocks that are part of the Nifty Smallcap 250 Index is known as a small-cap mutual fund. As per SEBI categorization, there are 250 stocks in the Indian stock market that are classified as small-caps based on their market capitalization, and for a small-cap mutual fund, at least 65% of their overall portfolio must be from these 250 stocks, while the remaining 35% can be from small-cap or any other market cap or even any other asset class like REIT(Maximum 10%) or Debt instruments.

How does a Small-cap mutual fund behave?

The nature of small-cap as a category is its deep fluctuations. Be it an upside or a downside, small-caps tend to have the sharpest movements when compared to mid-cap and large-cap peers.

Small-caps in most situations follows the overall economy’s trajectory. When there are positive sentiments and an economic boom with flourishing business activities, small-cap funds significantly generate humungous returns. At the same time, when there are massive negative instances affecting the market or when the tide of the economy starts to turn pessimistic, small-cap funds start to sink first. A typical small-cap mutual fund is prone to more risk as it may stay in the negative territory and decline rapidly but also more rewarding as it flies higher than the rest in the long run.

From the above image, two key inferences can be drawn. The red box conveys how an active small-cap fund(ICICI Smallcap), denoted by the blue line, has nearly underperformed the flagship large-cap Index(Nifty 50), represented by the yellow line, for around three years, starting from May 2018 till May 2021. The green arrow signifies the strong outperformance beginning from June 2021 till the present. So this clearly indicates that Small-cap tends to react significantly to market movements, be it a crash during May 2018/ March 2020 or the upside recovery in 2020-21.

Some of the famous small-cap mutual funds:

1. ICICI Smallcap (Rejuvenated performer)
2. Axis Smallcap (Long-term performer)
3. Canara Robeco Smallcap (Rising Star)

Features of Small-cap mutual fund:

1. Highly volatile when compared to other main categories of equity mutual funds.
2. Involves very high risk but matches it with very high returns in the long run.
3. Susceptible to severe drawdowns and crashes, especially in the short term.
4. Possibilities of prolonged periods of negative returns.
5. Significant Alpha-generator and consistently outperforms the index.
6. Invests in companies that have the potential to become large-caps. E.g., Bajaj Finance
7. Front-runners of future growth drivers of the country.

Suitability of Small-cap mutual fund:

1. Investors who are seeking long-term capital appreciation.
2. Well suited for an investment time horizon of more than seven years.
3. Investors who are seeking higher returns than other equity categories.
4. Investors who possess a high-risk appetite with greater risk capacity.
5. Fulfilling long-term goals like Retirement, Children’s education, Wealth creation, etc.
6. Investors who can understand different phases of market cycles.
7. Investors who are comfortable with very high levels of volatility.

It is safe to say that small-cap mutual funds are ideal for long-term wealth creation. However, at the same time, one must understand their nature and the risks associated with them before investing. Get in touch with your financial expert to know more!

Quant AMC has launched an NFO, which is now open for subscription from July 20th, 2022, and closes on August 3rd, 2022.

Investment Objective: To generate wealth over the long term, suitable for investors having a moderate risk appetite who are comfortable with volatility in the short term.

Investment Strategy: As the name suggests, the fund aims to invest in large-cap with its selection predominantly from the top 100 stocks of Nifty. The fund follows a unique style that emphasizes dynamic-style investing based on its in-house VLRT model to select potential outperformers with an overall macro-centric outlook. The fund will invest at least 80% of its portfolio in large-cap companies, and the remaining 20% can be in large-caps or any other Equity market-cap/Debt Instruments or Cash. The focus is to create returns that can outperform the benchmark by active fund management.

Fund Manager: Ankit Pande, Sandeep Tandon, and Vasav Sahgal

Benchmark: Nifty 100 TRI

Minimum Lumpsum Investment Amount: Rs 5,000

Minimum SIP Investment Amount: Rs 1,000

Fund Management Process:

1. The fund follows active management with the expectation of generating alpha over the long term.
2. The investment universe is majorly from the Nifty 500 TRI.
3. The portfolio is constructed and managed through the following process:

• VLRT, an investment framework designed in-house is followed:

a) V - Valuation Analytics

b) L - Liquidity Analytics

c) R - Risk Appetite Analytics

d) T - Timing

• Include “Predictive Analytics” to sustain and outperform in an ever-changing macro environment.
• Follow “Adaptive Asset Allocation” instead of traditional investing to make the most by involving market timing indicators.
• Use Dynamic-style rebalancing to churn and periodically strengthen the portfolio.

4.  The focus is not on any sector/theme but is driven by a multi-dimensional approach.

5.  Prominence is given to overall macro factors rather than micro-specific elements.

Opportunity:

Large-caps, historically, are known for their resilience when compared to mid and small-caps. They offer significant downside protection and perform better during extreme market conditions.

The extent of volatility is experienced lesser by large-caps when positioned against mid and small-caps, making it more stable for investors. The level of drawdowns experienced by mid and small segments of the market is much deeper and sharper.

Based on our analysis, we have observed the following pros and cons:

Pros:

1. Offers superior downside protection over a longer time frame
2. Relatively more stable and less volatile when compared to mid and small caps
3. Mitigates risk by using dynamic-style investing
4. Robust internal processes of the fund house to perform consistently during different market periods
5. Focuses on India’s biggest companies that have a proven track record of growth and revenue

Cons:

1. The investment universe is limited to only large-caps
2. Relatively smaller fund house with lower Assets Under Management(AUM)
3. Strong reliance on market timing indicators and predictive analytics, which may not work at all points in time

Large-caps, traditionally, have formed the core part of investment portfolios for the majority of investors as it not just offers stability but also succeeds in delivering inflation-beating returns. A Large-Cap approach would be ideal for a moderate-risk investor to participate in the growth story of India’s biggest companies, in turn creating sustainable wealth in the long run.

It is of utmost importance that the fund is discussed with your financial advisor and then ascertain whether it is suitable to invest in. Always read the scheme documents thoroughly before investing.

Gold, the most sought-after commodity, is prized not only for its luster and physical properties but also as a popular asset class for investing, thereby making it an essential part of humankind.

Major applications of gold

Historically, gold has been used to make coins, bullions, and jewelry, but in recent times it has been used in a variety of less typical ways.

Awards, Jewelry, and Status symbols – The sentimental value and quality of gold make it one of the favorite status symbols to be adorned with. It has been put to use in wielding the most noteworthy ornaments and accolades like wedding jewelry, Olympic medals, Oscars and statues of religious deities, etc.

Coinage, Bullion, Backing – The first known use of gold in transactions dates back over 6000 years ago. Even early printings of paper money were backed by gold held in safekeeping for every unit of money that was in circulation. The gold standard was once used by many nations but it eventually became too cumbersome and is no longer in use.

Dentistry and Medicine – Gold has been used in dentistry since 700 B.C for fillings, crowns, and orthodontic appliances because of the metal’s chemically inert and non-allergenic properties. In the medical field, small amounts of gold have been used in certain radiation treatments and diagnoses.

Electronics and Computers – The most important industrial use of gold is in the manufacturing of electronics. Because of its highly efficient property as a conductor and connector, gold is found in small portions in many electronic devices like mobile phones, television sets, GPS devices, computers, and laptops.

Gold as an investment portfolio constituent

The yellow metal has been considered a safe haven that investors can rely on during times of economic crisis. On most occasions, when an asset class like equity enters a bearish phase or shows signs of a downward trend, the value of gold tends to rise. Interestingly, Gold prices have seemed to grow around 11.5% on average in the years when the inflation was over 6% making it one of the best bets for hedging against inflation and global uncertainty.

This commodity is historically known to preserve investment value and protect capital when the economy is weak. During the Covid-19 pandemic in 2020, when equity markets worldwide took a hit, gold was one of the very few asset classes that were delivering positive and double-digit returns.

One of the major reasons why you should consider adding gold to your investment portfolio is because of its inverse relation with other asset classes which would act as the perfect cushion against market downturns, thereby diversifying your portfolio.

The above figure is a comparison of Sensex data with gold prices. When the equity markets had crashed by more than 50% generating negative returns, gold had produced positive double-digit returns. Especially during the global financial crisis when the markets crashed by -61%, the precious metal had gained around 40% returns to its investors. Similarly during the dot-com bubble, when the markets fell by -53%, gold had grown by around 15%. This shows the inverse relation between these two asset classes.

NIFTY 500 and GOLD

The three instances considered below are some of the historic stock market crashes. NIFTY 500 represents the top 500 companies listed on the National Stock Exchange of India. This index measures the performance of the broader Indian market.

We have considered this index to get an extensive view as this index is not just restricted to the large-cap stocks that are part of the Nifty 50, but also constitutes mid-cap and small-cap stocks.

SCENARIO 1

Equity allocation – 100%

SCENARIO 2

Equity allocation – 85%

Gold allocation – 15%

In each of these cases, the portfolio without gold has gone down by a huge margin, but the portfolio that has been diversified with gold has reduced the losses. During the dot-com bubble and financial crisis, the gold exposure cut down the extent of fall by 11%, thereby reducing the volatility in the portfolio. This shows the ability of gold with such a small allocation to minimize the extent of losses and maximize the stabilization of your portfolio during severe drawdowns in the equity markets.

How should you add it?    

Buying physical jewelry cannot be considered an investment as it is bought for the sake of consumption. Purchase of physical gold coins or bars cannot be as beneficial as an investment due to the additional storage costs and making charges involved.

If you are planning to buy gold as a portfolio investment, we would suggest going for Gold mutual funds where you would receive units representing physical gold in an electronic form.

GOLD MUTUAL FUNDS

Gold mutual funds are open-ended mutual funds that invest in units of Gold ETFs that in turn invest in gold of 99.5% purity and generate returns. The gold mutual funds’ performance will depend on the fluctuations in the physical gold price.

Why choose Gold mutual funds over other alternatives?

·         Transparent and close to the actual price of the commodity in the market

·         No storage costs, making charges, and purity-related concerns.

·         An investor need not worry about the safety and liquidity problems associated with holding physical commodities.

·         Easy to track the value of your investment as the NAVs of gold funds reflect the price of gold daily.

·         Flexible investment through SIPs that would help in capturing the ups and downs of gold prices make the most out of volatility.

·         Ease of redemption as the amount will hit your bank account in 5 working days.

·         Easier to rebalance and change the overall portfolio asset allocation

·         No minimum or maximum limit on investment

Gold plays an important role as part of one’s asset allocation due to its low correlation with other asset classes and so if other asset classes underperform, gold would counteract and stabilize the portfolio.

Investors who are investing in equity, but are not yet fully comfortable with the volatility can add some exposure to gold. Mutual funds are one of the easiest ways to invest across asset classes that help in diversifying your portfolio. Get in touch with your investment manager to ensure your portfolio is diversified enough as per your risk profile and goals.

Quantum AMC has launched an NFO, which has opened for subscription from July 18th, 2022, to August 1st, 2022.

Investment Objective: To generate wealth over the long term, suitable for investors having a moderate risk appetite who are comfortable with volatility in the short term.

Investment Strategy: The fund emphasizes on Nifty 50 benchmark (Listed stocks on NSE from 1 to 50). Stocks are filtered based on the free-float market capitalization of the index with a precisely defined proportion assigned to each of them (50 stocks in this case). The focus is to create returns that can replicate the benchmark without any active human intervention.

Fund Manager: Hitendra Parekh

Benchmark: Nifty 50 TRI

Minimum Lumpsum Investment Amount: Rs 500

Minimum SIP Investment Amount: Rs 500

Fund Management Process:

1. The Selection criterion is purely based on the existing stock constitution of Nifty 50.

2. The Fund will replicate the Index based on the free-float market capitalization.

3. Any changes in the benchmark(Nifty 50) will automatically reflect in the fund.

4. The Portfolio is rebalanced every six months.

Pros:

1. No fund manager bias or human intervention
2. It focuses on India’s top 50 listed companies that are well-established and have a history of solid performance
3. No exit load is applicable
4. It is completely Sectoral and Style Agnostic
5. Since it mirrors the index, the cost is low

Cons:

1. It is Limited to just Nifty 50 Universe
2. The weightage of each stock is directly linked to the index and cannot be actively changed at any point in time
3. It is restricted to only a specific market capitalization
4. The fund cannot take active calls like holding cash in a portfolio

This fund does not have active management but focuses more on the Nifty 50's stability and its historical capacity for inflation-beating returns. There is no filter used in selecting these stocks as every single one of them is included in a specific proportion which makes it a risky bet but, at the same time, removes manual intervention to churn stocks.

It is of utmost importance that the fund is discussed with your financial advisor and then ascertain whether it is suitable to invest in. Always read the scheme documents thoroughly before investing.

Broader markets were largely flat in the week with some movement seen in mid and smallcaps.

The most significant market mover this week was the release of US inflation data. As anticipated, the number was another all-time high at 9.1%. Markets did not have a major reaction to the same as the news was already signaled by Fed and factored in. Both S&P 500 and Nasdaq 100 ended the week flat.

Economic experts say that this is the peak of inflation for the US and there will a gradual drop in the coming months. The 75bps July rate hike still stands anticipated.

On the other hand, Indian inflation for June eased and stood at 7.01%.

Sectoral Movement

Segments that have underperformed the last bull cycle like banks, auto and pharma seem poised to benefit in the next couple of years since their undervalued levels provide a good margin of safety. On the other hand, though overvalued segments like tech are correcting significantly, such levels are a good opportunity to slowly accumulate with a long-term vision.

Usually, rupee depreciation helps the IT sector as most services are outsourced to global counterparts. Despite this, IT stocks are correcting as earnings in the segment are expected to slow-down in the coming quarters.

NFOs currently open

After a long hiatus, NFOs are back in the market. Some interesting ones this week was the flagship fund of Whiteoak Capital. You can read more about the fund here. The entire list of NFOs is as below:

• Edelweiss Focused Equity Fund
• Motilal Oswal S&P BSE Financials ex Bank 30 Index Fund
• WhiteOak Capital Flexi Cap Fund

WhiteOak Capital AMC has launched an NFO, which is now open for subscription from July 12th, 2022, and closes on July 26th, 2022.

Investment Objective: To generate wealth over the long term, suitable for investors having a moderate risk appetite who are comfortable with volatility in the short term.

Investment Strategy: As the name suggests, the fund will invest in a completely flexible manner across all areas of the market based on opportunities, namely Large, Mid and Small cap stocks that are winners in their respective sectors. The fund follows an approach that emphasizes investing in great quality businesses at attractive valuations. The fund will invest at least 65% of its portfolio in Equity and Equity oriented investments, and the remaining 35% can be in any other Equity market cap/Debt Instruments or Cash. The focus is to create returns that can outperform the benchmark by active fund management with no restrictions on any specific market size/cap.

Fund Manager: Ramesh Mantri and Piyush Baranwal

Benchmark: S&P BSE 500 TRI

Minimum Lumpsum Investment Amount: Rs 500

Minimum SIP Investment Amount: Rs 500

Fund Management Process:

1. The fund follows active management with the expectation to generate alpha over the long term.
2. The investment universe is majorly from S&P BSE 500.
3. The portfolio is constructed through the following process:

• Stocks are selected based on a bottom-up approach.
• Focus is more on stock-specific rather than overall market-specific.
• Identify and invest in great businesses which are available at attractive valuations.
• Include Pro-cyclical as well as Counter-cyclical stocks to reduce macro shocks.

4.  No specific bias to any sector overall, but preference will be towards company-specific growth rather than industry.

5.  No specific bias to market capitalization and will be periodically revised based on opportunities.

6. No fixed preference for Value/Growth style of investing.

Opportunity:

The markets inherently are highly volatile, and every single sector or segment of the market performs differently in different time frames. A flexi-cap strategy attempts to make the most of all the opportunities present in the market without having any bias or preference for a specific segment/size/sector.

Diversifying across all the market capitalizations helps in not just providing consistent returns over the longer time frame and provides minimal scope for sustained periods of underperformance as opposed to a traditional market-cap based equity mutual fund which is wholly mandated to its respective category.

Based on our analysis, we have observed the following pros and cons:

Pros:

1. Completely Market Capitalization Agnostic
2. Relatively more stable and consistent with lower drawdowns
3. Mitigates risk by avoiding concentration in any sector/stock/segment of the market
4. No limitations or mandated restrictions towards any sector or style of investing
5. Dynamic approach of investing with flexibility to shift across market-caps based on opportunities as there are no restrictions

Cons:

1. Investment universe is vast, making it susceptible to over diversification
2. New fund house with no particular track record in the mutual fund space
3. No specialization in any specific market segment

History has repeatedly reminded us that no single category can be the best at all points; hence, a Flexi-Cap approach would be ideal for a moderate-risk investor to get the best of all flavors of the market to create sustainable wealth in the long run. It is of utmost importance that the fund is discussed with your financial advisor and then ascertain whether it is suitable to invest in. Always read the scheme documents thoroughly before investing.

Mutual Fund is an investment product that caters to all segments of investors based on their needs and requirements. It is a single product with multiple uses as it invests across various asset classes to fulfill distinct needs. It can be as simple as planning for a vacation to achieving a major life goal such as retirement. Primarily, Mutual Fund is one of the most effective tools to create wealth in the long run and also sustain wealth once it is built.

Broadly, there are 4 Asset classes in which Mutual Funds invest - equity, debt, commodities, and REIT.

Equity:

The most popular asset class by far when it comes to investing in mutual funds. Mutual Funds invest across several companies in the stock market with periodic portfolio reviews and rebalancing to optimize the best possible returns. Equity Mutual Funds offer long-term capital appreciation with volatility in the short-term to medium-term. There are various types of Equity Mutual Funds in which investors can invest their money. The wide variety of categories and schemes makes it important to understand what they signify.

1. Large-Cap: Listed Stocks ranging from 1 to 100 on India's National/Bombay Stock Exchange(NSE/BSE) are classified as large-caps. They have the highest liquidity and largest market capitalization. They are also known as Blue-chips. At least 80% of the investments must be in large-cap stocks to qualify as a large-cap mutual fund.
2. Mid-Cap: Listed stocks ranging from 101 to 250 on India’s National/Bombay Stock Exchange(NSE/BSE) are classified as mid-caps. They have moderate liquidity and higher risk than large-cap companies. At least 65% of the investments must be in mid-cap stocks to qualify as a mid-cap mutual fund.
3. Small-Cap: Listed stocks ranging from 251 to 500 on India's National/Bombay Stock Exchange(NSE/BSE) are classified as small-caps. They have the lowest liquidity and highest risk compared to large-caps and mid-caps. At least 65% of the investments must be in small-cap stocks to qualify as a small-cap mutual fund.
4. Flexi-cap: A category that can invest across all market caps without any restrictions or constraints without any defined proportion to any of the market caps as per fund manager discretion.
5. Multi-cap: A category that needs to invest a minimum of 25% in large-caps, 25% in mid-caps, and 25% in small-caps. The remaining 25% of the portfolio can be in any market cap as per the fund manager's discretion.
6. Focused: A category that is curtailed to a maximum of 30 stocks in its portfolio is a focused fund. It is diversified across sectors but is concentrated as it cannot exceed 30 stocks.
7. Large and Mid-cap: A category that needs to invest a minimum of 35% in large-caps and a minimum of 35% in mid-caps. The remaining 30% can be in any market cap as per the fund manager's discretion.
8. Sectoral: A category that invests only in a specific sector of the stock market. It is susceptible to high concentration risk and lacks diversification as it focuses on just one particular sector. For example, a Pharma fund would invest only in the pharmaceutical industry and would not invest in other sectors.
9. Thematic: A category that invests across a broad theme consisting of sectors that complement/supplement one another for a bigger theme. For example, a theme like MNC(Multinational companies) will have MNC stocks from all major sectors.
10. Value/Contra: A category that invests in stocks that are either in a turnaround phase or are relatively undervalued when equated with the broad-based indices.
11. Index: A category that replicates the benchmark/index. The portfolio and proportion of each stock in the index fund are the same as its underlying benchmark.
12. International: A category that invests in foreign stock markets to capture global companies and their growth.

Debt:

A financial instrument that consists of treasury bills, bonds, deposits, and other fixed-income securities. It provides stability and safety, which makes it a suitable investment product for short-term requirements. Debt Mutual Funds are majorly used for capital protection and wealth preservation. Some of the common ones are as follows:

• Less than 1 year: Categories like Overnight, Liquid, Ultra-short, Low Duration, and Money market mutual funds invest in Debt securities like treasury bills and bonds, which have their maturity in less than 1 year.
• 1-4 years: Categories like Short duration funds invest in debt securities maturing between 1-3 years, while Medium duration funds invest in debt securities maturing between 3-4 years.
• Gilt Fund: A category of debt funds that invest in government securities that have the highest levels of credit safety.
• Dynamic Bond Fund: A category that can invest across securities with differing maturities to make the most of interest rates fluctuations.
• Corporate Bond Fund: A category that invests in a mixed variety of high-rated corporate bonds.
• Banking and PSU Debt Fund: A category that purely focuses on Debt instruments issued by Banks, Public Sector Undertakings, and other Public Financial Institutions.

Commodities:

An asset class that has been used extensively by humankind for various purposes, ranging from raw materials to fashion to investing. Gold and Silver are the top commodities that allow Mutual Fund investors to get exposure by investing in their digital modes.

• Gold: A natural hedge against inflation and performs well when there is lots of uncertainty and pessimism surrounding the markets. In most cases, gold is inversely correlated with Equity.
• Silver: Age-old metal which also displays reverse trends with equity but is extreme volatility, having more fluctuations than gold. Silver is also used as a raw material in various industries creating strong demand.

REIT:

Real Estate Investment Trust, popularly known as REIT, is a new age investment theme in the mutual fund industry that allows investors to invest in a basket of stocks that own real estate like Industrial Parks, Apartments, etc., which generate regular periodic income like rents.

Certain special categories of Mutual Funds that invest across the above-mentioned multiple asset classes in a single fund. There are various types of these funds, with the major ones being Hybrid(Equity+Debt) and Multi-Asset(Equity+Debt+Commodities).

Watch this space for more on the Mutual Fund Series!

Nifty 50 surged in the week and crossed the psychological 16,000 mark amid an upbeat market.

Over the next few weeks, market and sector movement will also be dependent on release of quarterly earnings and guidance.

U.S markets also had a good week with S&P 500 up 4% and Nasdaq up over 6% in the week.

However, the worst is not behind us. Inflation concerns still persist. In the coming week, US inflation data for the month of June is expected to release and reports say that it might be another record-breaking high number. This would keep Fed's 75 basis points rate hike for July on track.

Indian inflation data is also expected to release in the coming days.

Sectoral Movement

Banks and FMCG led the gains while IT and pharma stocks showed muted performance. PSU banks jumped significantly, led by Canara Bank amid buzz that the government might make a positive announcement for the sector.

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