Tag: investing in India

  • Mutual Funds in India Are Popular

    Mutual Funds in India Are Popular

    Mutual Funds in India
    Why Investing in mutual funds in India is very popular and developing at amazing speed? Here is the answer.

    By Guy Avtalyon

    Investing in mutual funds in India is developing at an extraordinary speed. The AAUM (average assets under management)  increased during the past 10 years more than 4,5 times. According to data from the beginning of this year, it was Rs. 23.16 trillion. Just compare it with Rs. 5.09 trillion in 2009. The investors have the opportunity to invest in 44 AMFI with more than 2,500 mutual fund schemes. AMFIs are associations of Mutual Funds in India.

    That is quite a large number. Occasions like this may be difficult for investors when it comes to picking the right fund. 

    What are characteristics of mutual funds in India

    A mutual fund is an investment tool supplied by money from different investors. The collected money is invested in an assortment of different asset classes. That can be equity, gold, foreign securities, etc. What is the secret of this popularity of mutual funds in India?

    Mutual funds can bring numerous benefits to investors. First of all, it isn’t necessary to invest a large amount of money since you can build a diversified portfolio with just Rs. 500. That is a great benefit for Indian investors.

    Another characteristic that gives mutual funds a favored choice amongst investors is the expert management of funds. Hence, investors may be pretty sure that their investments are safe. That’s the general characteristic of mutual funds. In India, the mutual funds are under SEBI and AMFI regulations which give additional security.

    Which mutual funds are popular in India?

    We already said that mutual funds in India are under SEBI regulations so they are grouped into three categories: Equity Funds, Debt Funds, and Hybrid Funds.

    Equity Funds  

    This kind of mutual fund invests a minimum of 65% of its assets in equity and equity-related instruments. Equity funds may give comparatively high returns. The point is that their basic investment is in stocks of companies that are sensitive to fluctuations in the stock market and the economy. Hence, equity funds are a bit riskier.

    SEBI recognizes 11 types of equity funds. One of the most popular is the ELSS – Equity Linked Savings Scheme. Its investments are almost 80% in equity and it is unique because ELSS is qualified for a tax deduction of up to Rs. 1.5 lakh. The lock-in period for this type of mutual fund in India is three years.

    Debt Funds 

    A debt fund invests a bulk, but less than 65%, of its assets in debt and money market securities. There is a lower risk for investments than in the equities. Debt funds in India yield returns which higher than returns given by fixed return investments. According to SEBI categorization, there are 16 types of debt funds in India. The most popular type of debt fund is a liquid fund. The big companies use them to store their extra cash for a short time, usually up to 91 days. Because of the shorter maturity period, liquid funds are the lowest risk investments. The advantage of these funds is that they are giving returns higher than savings accounts and almost equal as fixed deposits while but more liquid than a fixed deposit.

    Hybrid Funds

    A hybrid fund invests in two or more asset classes including equities. It can be debt, gold, abroad securities, money market instruments, etc. But usually, a hybrid fund invests in two asset classes: equity and debt. The mixture of equity and debt allows a hybrid fund to provide returns comparable with those provided by equity funds but promising proportionately lower risk levels like debt funds. According to SEBI categorization, we can recognize 7 types of hybrid funds.

    The most well-liked type is the Dynamic Asset Allocation Fund. It can invest between zero to 100% of its assets in equities or debts. This type of fund trades equities and profiting during overvalued equity market conditions. A Dynamic Asset Allocation Fund reduces its debt vulnerability during the undervalued markets and increases its debt holdings when is a bull run.

    Money Market Funds

    Some investors trade stocks in the stock market, the others invest in the money market. The government, banks, or companies regularly issue money market securities, for example, bonds, dated securities, and certificates of deposits are some of them. The fund invests your money and pays you proper dividends in return. In short-term investing, for instance, no longer than 13 months, the risk is lower.

    The benefits of investing in India 

    You can start investing with just Rs. 500 and there is no maximum limit to your investment. Also, you will get professional management of your investment. Funds corporations will charge you some fee for that service. It is a so-called expense ratio and it can vary from 0,5% to 1,5%, but due to the SEBI regulation, it will never be more than 2,5%.

    Moreover, you may gain higher returns since mutual funds allow long term returns in a range from 7% and 15% or more for investments for more than 5 years. It is clear that these returns are higher than the inflation rate and that is the reason why they are so popular.

    Diversification is another reason. Mutual funds permit investors to access to a broad and diversified investment portfolio. That provides a balance between risk and return which is extremely important for every investor. And as we said in the beginning, investing in mutual funds in India is developing at an extraordinary speed due to the various possibilities for investors and lower investment risk.

  • Indian stock market is worthy to invest

    Indian stock market is worthy to invest

    Indian stock market is worthy to investIndia: Taj Mahal
    By Guy Avtalyon

    Are you one of the rare investors who know what magnificent opportunities you can find in investing in the Indian stock market?

    Or you are not?

    It is a promising market. But, before investing in the Indian stock market, here’s what you should know. It is essential to focus on the stock market if you want to invest in it.  

    First of all, you should know that India is globally the quickest expanding economy.  Measuring GDP, India takes seventh place in the world. Also, the third-largest buying power parity in the world. The growth is coming from the service industry. After the economic liberalization policies 1990s, Indians considerably improved life.

    Investing is a confirmed way to produce long-term wealth. And besides, anyone can start investing.

    Is the Indian stock market worthy to invest in?

    In India, you have two stock markets where you can make your trades, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). You have to find the company has good nitty-gritty, an basically a strong company.

    The BSE has more than 5,000 listed companies and NSE has about 1,600. Both stock markets match the same trading principles, trading hours, settlement rules.

    Determining a sustainable company is easier said, than done. Anyway, we will give you short reviews of a few Indian companies with big economic moats around them.

    What is MOAT?

    Let’s go back to the past for a moment.

    In the Middle Age, all around the castles were digging channels. Then, they would charge the channels with soil and water. That is the moat. And it was very helpful if the enemy tried to provoke or attack. Thanks to moats the castles were prepared to persist for a long time period.

    The same idea of ‘MOAT’ is appropriate in the stocks.

    Many companies have an unseen shield around themselves. That gives them an influence on the market. They have a brand. For example, Gillette or Colgate or Suzuki or Coca Cola. MOAT companies in India are, for example, Asian Paints or HDFC Bank. Also, MOAT companies may have a business monopoly. Such a case is with Coal India.

    Indian Companies with big MOAT

    • ITC: Cigarettes – ITC Ltd covers 81 % of the cigarettes selling in India
    • Castrol India: Giant among automotive and industrial lubricants in India. Holds around 48% market share in the global Indian lubricant market.
    • Asian Paints: It owns over 54% of the market share in the Indian paint industry.
    • Jockey India: Actually, it is Page Industries, one of the biggest producers of underwear in India.
    • Hindustan Unilever or HUL: Hindustan Unilever or HUL: They offer some of the popular brands, that are used by 2 billion people on a daily base. That, among others, include Cif, Dove, Lipton, Vaseline, Pepsodent, Wheel, etc.
    • Pidilite Industries: It is adhesives producing company. Their brands are Fevicol, Fevikwik, Fevistick, M-Seal, etc.
    • Britannia Industries: It is an Indian food corporation with Britannia and Tiger brands. Its headquarters in Kolkata, West Bengal. Among their offered brand names are biscuits VitaMarieGold, Tiger, Nutrichoice Junior, Treat, Pure Magic, Milk Bikis, Good Morning, Bourbon, Nice, Little Hearts between others. Nestle: It is a famous producer of “Maggi”, chocolates, etc
    • United Spirits or USL: is an Indian alcoholic beverage company and the world’s second-largest spirits company by volume. USL exports its products to over 37 countries. It has more than 140 liquor brands such as McDowell’s, Royal Challenge, Antiquity, Vladivar, Romanov, etc.

    IT and business services outsourcing is a very important part of India’s economy.

    Indians are very well educated, skilled and English-speaking. Moreover, they are not expensive workers. That’s why the IT sector provided about 8% of the country’s GDP.

    Business services outsourcing is a less important but more popular business in India. BPO is the express increasing part of the industry in India. So, it is valuable to consider investing in those companies.

    How to invest in the Indian stock market if you are not its resident

    If you are not an Indian resident the Indian stock market is a foreign market for you. But you can still invest. For example, you can buy stocks directly. Honestly, it is a bit tricky. Much more than investing in domestic stocks. But if you want to invest in some company listed on a foreign exchange you can do it over your brokerage.

    If your brokerage provides that kind of service, it has to contact the market maker in India.   Sincerely, you have to be prepared that the stocks you want are not accessible. That is the bad side. The simplest way is to set up an account directly in some of India’s brokerage. Almost all the notable companies in India are listed on both the markets.

    Even if you are investing in the long-term, always look for a ‘moat’ in the company. It improves the profitability of the company. And it is very important in India’s markets. Having a business ‘moat’ gives these companies plenty of support.

     

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