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Invest in 3 asset classes
through 1 scheme with an
aim to mitigate the impact
of market volatility
Presenting HDFC Multi-Asset Fund
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The current investment strategy is subject to change. HDFC Mutual Fund/AMC is not guaranteeing/offering any indicative
yields or returns on investments made in the Scheme. The product positioning is based on current view and is subject to
change. For complete portfolio details refer www.hdfcfund.com
To know more, contact your Mutual Fund Distributor /
Registered Investment Adviser or give a missed call on 73974 12345.
HDFC Multi-Asset Fund (An Open-ended Scheme Investing In Equity And
Equity Related Instruments, Debt & Money Market Instruments And Gold
related instruments) is suitable for investors who are seeking :
*
• To generate long-term capital appreciation/income
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instruments, debt & money market instruments and Gold related instruments
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the product is suitable for them.
For latest riskometers, please refer www.hdfcfund.com
Date of release: 15 February, 2021
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS,
READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
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Get money
smart
Know the risks,
suitability,
2019-20 Price
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Incorporating Savings & Investment Yearbook 2019-20
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<HV , ZDQW WR EX\ Your Guide to Best Investments
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in equity and related securities and provides tax benefit under section 80C of Income Tax Act, 1961.
Investors understand that their
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them. principal will be at very high risk
^Calculated at the highest tax slab rate for FY20-21 applicable on investments u/s 80C. Surcharge has been ignored for ease of calculation. The Risk-o-meter(s)
specified above will be evaluated and updated on a monthly basis. Please refer https://www.icicipruamc.com/news-and-updates/all-news for more details.
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CONTENTS
0$5&+
Volume XVIII, Number 6 25 Cover Story
Editorial How to
Principles
Value Research is an use the new
independent investment
research company. Our goal is
to serve our readers with data,
information and knowledge
that inform them about riskometer
savings and investments and
help them learn how to make
better choices.
The basis of our work is the
trust reposed in us by our to assess risk
readers. We are independent,
fair and honest. We are
committed to achieving the
highest level of accuracy and
impartiality in everything that For investors, ascertaining the risks associated with
we publish. their funds has thus far been a mirage. SEBI’s
We recognise that the
nature of our work is such new risk-o-meter is set to change that.
that it influences decisions
that affect our readers’ future.
We strive to bear this
responsibility with humility.
We recognise that while it is
not possible to be 100 per
cent accurate, it is possible to 12 Value Research Premium SUPPLEMENT
always strive to achieve that
standard to the best of our Fixing mistakes
abilities.
Admitting past mistakes and fixing them
Special Supplement March 2021
Editor Dhirendra Kumar is important to making sure your
Research and Editorial Aakar Rastogi, investments help you meet your goals.
Ashutosh Gupta, Debjani Chattopadhyay, Here’s how Value Research can help.
Deepika Saxena, Gautam Gupta, Omkar Vasudev
Bhat, Sandeep P, Sneha Suri, and Vibhu Vats
Design Mukul Ojha
Production Hira Lal
ADVERTISING
Venkat K Naidu: 09664048666
Biswa Ranjan Palo: 09664075875 &
Address your correspondence to: YOU
Editor, Mutual Fund Insight
5 Commercial Complex, Chitra Vihar,
Delhi-110092, India 1 BUDGET & YOU
e-mail: [email protected]
© 2021 Value Research India Pvt. Ltd. Mutual Fund Insight is owned by Value Research India Pvt. Ltd., 5, Commercial Complex, Chitra Vihar, Delhi 110092.
Editor: Dhirendra Kumar. Printed and published by Dhirendra Kumar on behalf of Value Research India Pvt. Ltd. Published at 5, Commercial Complex, Chitra Vihar, Delhi 110 092. Printed at Option Printofast, 46, Patparganj Industrial Area, Delhi -92.
Registered with the Registrar of Newspapers for India, Registration Number DELENG/2003/11417
4 Mutual Fund Insight March 2021
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9 First Page 22 Spotlight
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The contents of Mutual Fund Insight published by Value Research India Private Limited (the “Magazine”) are not intended to serve as professional advice or guidance and the Magazine takes no
responsibility or liability, express or implied, whatsoever for any investment decisions made or taken by the readers of this Magazine based on its contents thereof. You are strongly advised to verify the
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for investors. The readers of this Magazine should exercise due caution and/or seek independent professional advice before entering into any commercial or business relationship or making any investment
decision or entering into any financial obligation based on any information, statement or opinion which is contained, provided or expressed in this Magazine.
The Magazine contains information, statements, opinions, statistics and materials that have been obtained from sources believed to be reliable and the publishers of the Magazine have made best
efforts to avoid any errors and omissions, however the publishers of this Magazine make no guarantees and warranties whatsoever, express or implied, regarding the timeliness, completeness, accuracy,
adequacy, fullness, functionality and/or reliability of the information, statistics, statements, opinions and materials contained and/or expressed in this Magazine or of the results obtained, direct or
consequential, from the use of such information, statistics, statements, opinions and materials. The publishers of this Magazine do not certify and/or endorse any opinions contained, provided, published or
expressed in this Magazine.
Reproduction of this publication in any form or by any means whatsoever without prior written permission of the publishers of this Magazine is strictly prohibited. All disputes shall be subject to the
jurisdiction of Delhi courts only. ALL RIGHTS RESERVED
6 Mutual Fund Insight March 2021
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FIRST PAGE
A new scale
This is a recipe for disaster, and or puzzling about them without
often leads to it as recent months understanding your own needs,
have shown us. With the official your own risk tolerance and your
risk meter, at least there will be own financial goals.
some measure of an important This go/no-go problem will be
characteristic of funds that will faced by investors acutely when
have to be officially stated by the the risk level of a fund changes. A
fund company and by distributors. few days back, in an online Q&A
As time goes by, some thorny about Value Research’s star ratings
issues will come up. One will be
to a particular fund, an investor
F or the readers of this that there will be individual cases complained to me that he had
where the system will throw up an
magazine and for the
invested in a fund because it had
members of Value
be a fund that was rated medium or
has now been lowered. I explained
Research Online, there is no need anomaly. At some point there will been rated five stars but that rating
for SEBI’s new risk meter. It does even low risk but it will have some that this was precisely what the
not add anything to the capability problems with credit, liquidity or ratings were for and if we never
you have for evaluating, selecting both. When there are hundreds of changed the ratings, then they
and investing in good funds, or of funds investing in hundreds of would be worthless. However, a
avoiding bad funds. Everything instruments, then over a long Value Research member is used to
that you need, it’s already here in enough period of time, there will be understanding nuances. I worry
our magazines and our website, some such events. How will about what will happen when the
and has been for years. Even for investors react? There will be some risk rating of a large fund falls by a
people who do not specifically use investors in such a fund who have level or two due to some external
our publications and tools but time and money to get into some factor. Could there be a run on the
have good experience or ill-advised legal adventure, as we fund? If there is some change in
knowledge of mutual fund have seen in the Franklin case. the external circumstances, that
investing, there is nothing new What’s more, despite the might lead to a number of large
that the risk meter does. You carefully drafted descriptions of funds simultaneously going up on
already know what it tells you. each rating that SEBI has come up the risk scale? Certainly, that’s
What the risk meter does is to with, it’s hard to translate a risk possible. So, could the very
give a certain evaluation of fund level into a go/no-go decision. So, a existence of the risk-meter system
quality an ‘official’ stamp. Looking fund has medium risk, and another end up causing instability? I don’t
around the world, I do not know of one has medium-to-high risk. In really know, but I suspect that this
any other regulatory regime that every other way, the medium-to- is a question that will have to be
does this. India is unique in this high risk one is better. What should answered at some point.
aspect. The question is, is India you do? Do the other parameters In any case, do read our cover
unique in needing this? I don’t have outweigh the risk-meter reading? story. As you would expect, it’s the
an answer to this. We have a huge How is this to be decided? SEBI most comprehensive bundle of
population of mutual fund cannot decide this for you. You, as knowledge on the risk-meter
investors who do not bother to find an investor, still have the duty to system that you will find anywhere.
out anything about the mutual understand your own needs. As I
funds they invest in except for keep saying, there is little point in Dhirendra Kumar
what the salespeople tell them. understanding the external factors Editor
Mutual Fund Insight March 2021 9
Subscription copy of [[email protected]]. Redistribution prohibited.
FUND REPORTER
Mutual fund industry sees net -\UK THUHNLY JOHUNL
outflows in January Schemes Existing Î New
The mutual fund industry saw SBI Long Term Advantage Fund Series VI Anup ICICI Prudential Equity Savings Fund Sankaran
net outflows of `35,500 crore in Upadhyay Î Gaurav Mehta & R. Srinivasan Neren, Kayzad Eghlim, Prakash Gaurav Goel, Manish
Banthia & Ritesh Lunawat Î Kayzad Eghlim,
January 2021. Open-end equity SBI Magnum Children’s Benefit Fund - Savings Prakash Gaurav Goel, Manish Banthia &
funds saw net outflows of `9,200 Plan Rajeev Radhakrishnan Î R. Srinivasan & Ritesh Lunawat
Rajeev Radhakrishnan
crore. Barring sectoral/thematic
ICICI Prudential Bluechip Fund Anish Tawakley &
funds and dividend-yield funds, IIFL Dynamic Bond Fund Ankur Parekh Î Rajat Chandak Î Anish Tawakley, Rajat
Rahul K Nambiar
all categories observed net Chandak & Vaibhav Dusad
outflows. IIFL Liquid Fund Ankur Parekh Î Rahul K ICICI Prudential Infrastructure Fund Sankaran
Nambiar
Open-end debt funds observed Naren & lhab Dalwai Î lhab Dalwai
net outflows of `33,400 crore, ICICI Prudential Dividend Yield Equity Fund Mrinal ICICI Prudential Multicap Fund Sankaran Naren &
Singh & Mittul Kalawadia Î Mittul Kalawadia
with liquid funds witnessing the Rajat Chandak Î Rajat Chandak
maximum net outflows among ICICI Prudential Focused Equity Fund Mrinal Singh ICICI Prudential Manufacture in India Fund Anish
& Mittul Kalawadia Î Prakash Gaurav Goel &
debt funds. Despite delivering Tawakley & Mittul Kalawadia Î Anish Tawakley &
Mittul Kalawadia
negative returns in January, Lalit Kumar
ICICI Prudential Value Discovery Fund Mrinal Singh
short-duration funds saw ICICI Prudential Business Cycle Fund Anish
Î Sankaran Naren & Dharmesh Kakkad
maximum net inflows, of `6,900 Tawakley, lhab Dalwai & Manish Banthia Î Anish
ICICI Prudential Bharat Consumption Fund - Tawakley, lhab Dalwai, Manish Banthia & Lalit
crore, amongst open-end debt
Series 2 Mrinal Singh Î Roshan Chutkey Kumar
funds.
ICICI Prudential Retirement Fund - Hybrid ICICI Prudential Growth Fund - Series 2 Mrinal
Aggressive Plan Mrinal Singh, Ashwin Jain, Manish Singh & Mittul Kalawadia Î Mittul Kalawadia
SC allows distribution of cash in Banthia & Anuj Tagra Î Ashwin Jain, Manish
Franklin’s shutdown schemes Banthia & Anuj Tagra ITI Banking & PSU Debt Fund George Heber Joseph
& Milan Mody Î George Heber Joseph &
On February 2, 2021, the ICICI Prudential Retirement Fund - Hybrid Vikrant Mehnta
Supreme Court allowed distribu- Conservative Plan Mrinal Singh, Ashwin Jain, Manish ITI Arbitrage Fund George Heber Joseph & Milan
tion of `9,122 crore (distribut- Banthia & Anuj Tagra Î Ashwin Jain, Manish Mody Î George Heber Joseph & Vikrant
Banthia & Anuj Tagra
able surplus as of January 15, Mehnta
2021) in Franklin’s shutdown ICICI Prudential Retirement Fund - Pure Debt Plan ITI Overnight Fund George Heber Joseph & Milan
Mrinal Singh, Ashwin Jain, Manish Banthia & Anuj
schemes amongst the unithold- Mody Î George Heber Joseph & Vikrant
Tagra Î Manish Banthia & Anuj Tagra
ers in proportion to their hold- Mehnta
ICICI Prudential Retirement Fund - Pure Equity
ings, subject to the fund-running Plan Mrinal Singh, Ashwin Jain, Manish Banthia & ITI Liquid Fund George Heber Joseph & Milan Mody
expenses. The apex court had Anuj Tagra Î Ashwin Jain, Manish Banthia & Î George Heber Joseph & Vikrant Mehnta
appointed SBI Mutual Fund to Anuj Tagra
carry out this exercise. ICICI Prudential ESG Fund Mrinal Singh Î
Importantly, the distribution of Lakshminarayanan K. G.
the money should preferably be
Estate fund to Global Excellence
carried out within 20 days from details of the facility – Retail
Equity Fund of Fund with effect
the date of the said order. Direct – will be issued soon.
from February 12, 2021.
For the complete timeline of
the Franklin crisis, see the Bhanu Katoch resigns from JM Nippon India Mutual Fund
‘Newswire’ section at www.valu- Financial AMC Changes the exit load of Growth
eresearchonline.com. Bhanu Katoch has resigned from Fund to 1 per cent for redemption
the position of CEO of JM
Retail investors to soon get direct Financial AMC with immediate within 30 days.
access to G-secs effect. He had been associated quant Mutual Fund
In its February Monetary Policy with it since October 2006. Merges Dynamic Bond Fund and
Committee meeting, the RBI pro- Money Market Fund into Liquid
posed to allow retail investors to (UUV\UJLTLU[Z Plan with effect from February
open gilt-securities accounts Aditya Birla SL Mutual Fund 13, 2021.
online with the central bank. The Changes the name of Global Real
10 Mutual Fund Insight March 2021
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-P_PUN TPZ[HRLZ
Admitting past mistakes and fixing them is important to making sure your
investments help you meet your goals. Here’s how Value Research can help.
Dhirendra Kumar income and it’s still easy to calcu- justifiable in our country. This
late and only a bit more difficult to hasn’t been helped by having had
n the maths you did in get right. However, real-life prob- some money unexpectedly locked
school, it was easy to solve lems are not like that. into the Franklin Templeton debt
an investing problem with An old acquaintance got in funds that have been the subject of
only one variable. If there are touch recently. He’s been following litigation over the last few months.
Itwo or three variables, then my advice in mutual fund invest- Now he has about two years left
the story is different, and for many ing over the last two decades but before he retires and would like to
of us, the story ended right there. somewhat intermittently. From time reconfigure his investments for the
Investing is just like that. Ask a to time, over the years, he and his final phase of his investing life. Up
simple question like I would like to family manage to get sweet-talked until now, for many decades, money
accumulate `50 lakh in 10 years, so by some salesperson and invest in was flowing into his investments
for what amount should I start a some hot fund that proves to be a but now the flow will reverse. It’s a
monthly SIP? It has a straightfor- problem. He also has a generally fundamental shift that makes the
ward answer, or at least an approxi- suspicious disposition towards right asset allocation and quality
mation. Add another variable in the businesses that he has to deal with, much more important. Moreover, a
form of inflation, or an increasing which, to be honest, is somewhat two-year horizon is about right to
start the reconfiguration.
This is a great lesson in never taking the future for granted. On top of that is the lesson
One’s investments must always be tuned to the exact asset learned from the down and up
cycle of investment values that we
allocation and fund selection that is ideally required. have seen in the last few months
12 Mutual Fund Insight March 2021
Subscription copy of [[email protected]]. Redistribution prohibited.
because of the virus that China
unleashed on the world. Those of
us who have many years of work
and earning left still had reason to
stay calm when the market crashed
at the beginning of the pandemic.
However, for anyone with just a
few years to retirement, it was truly
unnerving to see 20–40 per cent of
the value of investments wiped out
when you know that you will never
be able to earn it again.
As it is, one can be thankful at
the way India has handled the pan-
demic and the way investments
have recovered. However, this is a
great lesson in never taking the
future for granted. One’s invest-
ments must always be tuned to the
exact asset allocation and fund
selection that is ideally required.
We can never put things off by say-
ing, “Yeah sure, I’m a little busy
right now, but I will get around to
fixing my portfolio in a few
months.” Who knows what new
virus is already being prepared in
China? You have to be ready.
Which is fine, but how do you
know what to do? My acquaintance
just called me and mailed me his A screenshot of the Portfolio Analysis feature on VR Premium, depicting how this
username and password on Value feature helps you better analyse your portfolio and get actionable insights
Research. However, I decided to do it
a little differently from the way I case of my friend, the system gener- example, when making new invest-
would have done so in the past. ated a clear-cut list of funds that he ments in funds. However, when the
Instead of going through it and apply- should redeem and the ones he task at hand is to fix problems in a
ing my opinions and knowledge, I should hang on to. Combined with given portfolio, where some invest-
decided to apply the algorithms that the tax analyser which is also built ments are good, some are not and
we have built into our new Value into the system, he was able to see some are partly good, then the job
Research Premium service. exactly what he should do to drasti- is more complicated.
That’s something that everyone cally improve the quality of his To fix things, we must recognise
has access to, not just my friends investments. The liquidity analysis what is wrong. This turns out to be
and acquaintances. It works quite showed him which investments quite hard, not just for operational
simply, as long as you have activat- were locked in for any reason. reasons but also psychological and
ed your Premium membership. You business ones. No commercial
enter your investments into the A LAYER OF KNOWLEDGE sales-oriented process will admit to
Portfolio Analysis feature and in At the end of the day, knowledge its mistakes, and as individuals too,
just a couple of steps, you get an and understanding provide the many of us will not. However, a
analysis of all your investments on inputs and investing consists of system like the Portfolio Analysis
a range of parameters like suitabili- actually doing things. In some system in Value Research Premium
ty, quality and diversification. In the cases, this is straightforward; for is designed to do just that.
Mutual Fund Insight March 2021 13
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INSIDE FUNDS
Funds in action
Across funds, portfolios tell you a lot about sectors and companies
The rally and the institutions Most bought and sold
As the market has raced, domestic funds have pulled money out of equity, stocks by funds between
while foreign institutional investors have increased their investments. November and December
z FIIsz Mutual funds (in ` cr) z Sensex
8,000 50,000 2020
6,000 45,000 In ` cr
4,000 40,000 Large caps
2,000 35,000 BOUGHT
0 30,000 Axis Bank 722
-2,000 25,000 HCL Technologies 420
Godrej Consumer 388
-4,000 20,000
-6,000 15,000 SOLD
-8,000 10,000 Kotak Mahindra Bank 1,984
Jan 2020 Jan 2021
HDFC Bank 1,599
Vedanta 1,587
Mid caps
BOUGHT
APL Apollo Tubes 1,305
IRCTC 988
Max Financial Services 667
SOLD
TVS Motors: Losing momentum Balkrishna Industries 453
Among listed two-wheeler makers, the number of funds invested in TVS PI Industries 390
Motors has sharply come down since January-February 2020
Trent 390
z Bajaj Auto z Hero Motocorp z Eicher Motors z TVS Motor Co.
200
Rebased to 100 Small caps
180 BOUGHT
Birlasoft 267
160
UTI AMC 122
140
JM Financial 117
120
SOLD
100 Majesco 99
PVR 85
80
Spicejet 82
60
Dec 2017 Dec 2020
14 Mutual Fund Insight March 2021
Subscription copy of [[email protected]]. Redistribution prohibited.
Aggressive outflows
For the last many months, aggressive hybrid funds have witnessed net
outflows on a monthly basis.
Outflows (` cr)
0
-500
-1,000
-1,500
-2,000
-2,500
-3,000
HDFC AMC: Growth in assets
-3,500
z Dec-19 z Dec-20 Growth (%) In ` cr
-4,000 450000
Dec 2019 Dec 2020 10.7
400000
Tata Motors: Decreasing fund interest
350000
The number of shares held by funds in Tata Motors has fallen over the
last three years in tandem with a falling stock price. The stock price,
however, has started rebounding lately. 300000
z Shares held (lakh) z Stock price (`) 24.2
3000 500 250000
450
2500
400 200000
350
2000
300 150000
2.9
1500 250 -13.3
100000
200
1000
150
50000
100
500
50
0
0 0 Equity Debt Hybrid Total
Dec 2017 Dec 2020
Mutual Fund Insight December 2020 15
Subscription copy of [[email protected]]. Redistribution prohibited.
FUND RADAR
How to reduce your NPS
transaction costs
NPS transaction costs can consume a chunk of your savings over time. Here’s
how you can bring them down.
he National Pension System (NPS) has seen the phase, at the age of 60, you can make a tax-free
number of subscribers under the ‘All Citizen’ withdrawal of the 60 per cent of the corpus. The
Tmodel (meant for citizens other than central/ remaining 40 per cent has to be utilised for buying an
state-government employees) rise to 14.44 lakh as annuity plan, which gets you regular income
on December 31, 2020, as against 78,774 in during your golden years.
March 2014. By the end of 2020, the total You can open an NPS account either
number of subscribers across various through a point of presence (POP) or
models of the NPS reached close to 1.40 directly through the Central Record
crore, with the AUM being more than Keeping Agency (CRA). Let us first
`5.34 lakh crore. understand what a POP and the CRA
This government-backed long-term are. A POP is appointed to open and
investment plan intends to secure the provide all the related services under the
post-retirement years of its subscribers by NPS through its network of branches. Just
helping them accumulate a corpus. Also, it visit a POP and they will help you open the
helps subscribers get an additional deduction of account. The list of POPs can be found at https://
up to `50,000 over and above the Section 80C limit of bit.ly/3ctjbPD. Almost all banks and even post offices
`1.5 lakh. While you can enjoy tax benefit on the are POPs.
investments made in the NPS during the accumulation On the other hand, CRA is an agency which
*OHYNLZ HZZVJPH[LK ^P[O [OL 57:
CRA charges are applicable in addition to the POP charges, if applicable
Intermediary Charge head Service charge Deduction method
Initial subscriber registration `200
Initial contribution 0.25% of the contribution amount Collected upfront
POP All subsequent contributions Min: `20 & Max: `25,000
$OO QRQ ÀQDQFLDO WUDQVDFWLRQV `20
` SHU DQQXP RQO\ IRU 136
Persistency Through cancellation of units
All Citizen)
PRA opening (one time) NCRA (NSDL) KCRA (Karvy)
PRA maintenance (per annum) `40 `39.36
CRA Through cancellation of units
3HU WUDQVDFWLRQ ÀQDQFLDO QRQ ÀQDQFLDO `95 `57.63
`3.75 `3.36
Custodian Asset serving (per annum) 0.0032% of assets under custody Through cancellation of units
Pension fund Investment management (per annum) 0.01% of assets under management
Through adjustment in NAV
NPS trust Reimbursement of expenses (per annum) 0.005% of assets under management
Source: PFRDA
16 Mutual Fund Insight March 2021
Subscription copy of [[email protected]]. Redistribution prohibited.
Investing in Canara Robeco Equity
Tax Saver Fund is like having twins.
You get a dual advantage.
The Canara Robeco Equity Tax Saver Fund offers you the twin advantage of growth potential from investing in
equities as well as tax savings under Sec 80C*. The three-year lock in period aids the potential for your money to
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It’s just one of the many funds from Canara Robeco that has the potential for you to have a smart tomorrow.
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RISKOMETER
This product is suitable for investors
who are seeking* :
• Capital appreciation over long term
• Investment in equity and equity related securities with
a statutory lock in of 3 years and tax benefit
To know more, please contact your Financial Adviser or visit www.canararobeco.com
*Under Section 80C of Income Tax Act 1961, Tax benefit upto INR 46800** per annum (assuming highest tax bracket) for an investment upto Rs. 1.5 lac. **Assuming tax rate of 30% plus 4% cess. Information on tax benefits are based on prevailing taxation laws.
Kindly consult your tax advisor for actual tax implication before investment.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Subscription copy of [[email protected]]. Redistribution prohibited.
FUND RADAR
maintains the records of subscribers, processes their directly with the CRA, it may not be a wise decision for
registration and withdrawal requests and so on. It is also someone who is not financially savvy or comfortable
responsible for generating regular account statements with maintaining the account or carrying transactions
and issuing the Permanent Retirement Account Number over the internet on his own. The CRA interface is
(PRAN) to subscribers following registration. completely online and more suitable for ‘DIY’ investors.
Here it is important to know the difference of But if you are not aware of various asset classes,
opening an NPS account through a POP and directly unsure about asset allocation, uncomfortable with
through the CRA. Besides the difference in the services online transactions or need some sort of assistance, or
provided by both, their recurring charges also vary. See prefer the offline route, then you should opt for the
the table ‘Charges associated with the NPS’. POP route, as the POP will help you with these issues.
Account opening: POP vs CRA Steps to open an NPS account online
You must note that CRA charges are bound to happen, To open an NPS account online with the CRA, one can
no matter whether you choose to open the account choose either NSDL or Karvy. Here is how you can open
through a POP or not. A POP is simply an intermediary an NPS account online with NSDL.
between you (the subscriber) and the CRA. By looking z Keep handy a scanned copy of the PAN card, a
at the above-mentioned table, you may think that it is cancelled cheque, your photograph, signature and
beneficial to open the account directly with the CRA Aadhar paperless offline e-KYC. To download your
and completely avoid the POP cost. By doing so, you Aadhaar paperless offline KYC, visit https://resident.
save on not only the account-opening charges but also uidai.gov.in/offline-kyc.
transaction and persistency costs, which are recurring z Visit the official website of eNPS (NSDL) at https://
in nature. If you invest through a POP, a minimum of enps.nsdl.com/eNPS/NationalPensionSystem.html
`20 is charged every time you make a deposit. This is z Click on ‘National Pension System’ and then on
in addition to the transaction cost charged by the CRA. ‘Registration’.
Although it is possible to make subsequent deposits z Select the ‘Aadhaar’ option in the ‘Register with’
directly to the CRA through eNPS after opening the field. Alternatively, you can select PAN but then, the
account through a POP, then also a trail commission is KYC will be routed through a bank where you
passed to the POP and a transaction charge of 0.10 per already have relation and a charge of up to `125 plus
cent is charged. In that case, the minimum and taxes may be collected.
maximum limits are `10 and `10,000. z Select ‘Tier 1 only’ if you want to save taxes and
Although it could be beneficial to open the account follow the on-screen instructions.
(]VPK 767 ZH]L TVUL`
About `24,000 is saved on transaction costs if someone opens the NPS account directly with the CRA and invests `50,000 at the beginning of every
year for a period of 30 years.
` 30,000
25,000
20,000
15,000
10,000
5,000
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
180(%5 2) <($56
Assumptions: Transaction cost at 0.25% of the transaction amount in the case of POP and `3.75 in the case of CRA. Persistency cost of `50 per annum in the case of POP. We have
assumed an annual return of 10 per cent.
18 Mutual Fund Insight March 2021
Subscription copy of [[email protected]]. Redistribution prohibited.
Mutual Fund Insight March 2021 19
Subscription copy of [[email protected]]. Redistribution prohibited.
Subscription copy of [[email protected]]. Redistribution prohibited.
Subscription copy of [[email protected]]. Redistribution prohibited.
SPOTLIGHT Manish Banthia Senior Fund Manager - Fixed Income, ICICI Prudential Mutual Fund
‘Shorter-duration accrual
products today make better
investments’
We speak to Manish Banthia about his
views on the debt market, the funds that
he manages, the yield curve and the fund
house’s risk-management practices,
among other things
What’s your view on debt markets and yield curve from
here on? Do you expect more rate cuts going forward?
When can we expect a rate reversal?
We don’t expect a rate cut, given the fact that the econ-
omy has rebounded out of the pandemic-caused slow-
down and the overall policy response both on the mon-
etary and fiscal sides has been very supportive. In the
Budget announcements made recently, the government
has prioritised growth over fiscal consolidation for the
next year as well, which clearly indicates that in the
future, we will see better growth numbers.
In terms of rate reversal, while we believe that in the
initial part, there may be some slack in the economy, it
is very difficult to pin-point exactly at which point the
rate reversal will happen. At some point, as the slack
in the economy gets covered, the RBI will need to
move back towards a normal interest-rate regime. The
current interest regime largely factors the pandemic
slowdown and interest rates will have to normalise at
some point in time.
What’s your advice to fixed-income investors from here
on? The gap between the trailing one-year returns and
the current YTMs is pretty wide.
The short-duration accrual products today make bet-
ter investments, given that we expect the RBI to start
rate reversal at some point in time. There have been
some adjustments in the market in the last one
month. We expect markets to be more volatile from
here and therefore products which can handle vola-
tility and with a reasonable carry and a shorter-dura-
22 Mutual Fund Insight March 2021
Subscription copy of [[email protected]]. Redistribution prohibited.
tion profile are better suited for investors in the cur-
rent environment. “Perpetual bonds of good-quality
banks have been instruments which
We see you actively take exposure to perpetual bonds
across debt and hybrid categories (in your short- have rendered a reasonable carry
duration fund, the exposure is 6 per cent). In the to the funds.”
context of some of the recent events, how risky are
these bonds? Are there any guidelines that you follow
for investing in such instruments, such as maximum The performance of your short-duration fund has been
allocation, select list of issuers, etc.? exceptional over the past one year. What has
We are very conservative while selecting AT1 bonds for contributed to its outperformance?
investments. The papers that we invest in are of those banks ICICI Prudential Short Term Fund was overweight on
where we are comfortable in terms of the existing capitalisa- AA assets since April-end, which was also the time
tion, quality of assets and ability to raise capital. Perpetual when the AA asset class looked very attractive. The
bonds of good-quality banks have been instruments which other factor which aided the fund performance was the
have rendered a reasonable carry to the funds, given that the fund’s overweight stance on duration at a time when
short-term yields on the AAA bonds were low. the yields corrected and reducing duration as the
We have risk-management guidelines across asset yields bottomed out.
classes and across individual credits in terms of sector
limits, asset limits and specific-issuer limits and these What is your approach towards credit exposures in
are monitored closely by the risk-management team. different funds? Your ultra-short-duration fund has a
At ICICI Prudential, we were among the early ones higher exposure to AA+ and below rated papers (32
in the mutual fund industry to establish an in-house, per cent) than short-duration and equity-savings fund
independent risk-management team. The idea here is (15 per cent).
to have a team which is independent of the investment The approach largely is to have up to 20 per cent of
team, without any return targets. All of the due-dili- the portfolio allocated to the AA asset class and the
gence work when it comes to onboarding credit is car- remaining part of the portfolio is invested across high-
ried out in accordance with our Debt Investment est-rated category papers (sovereign, SDLs and AAA
Policy, i.e., SLR (safety, liquidity and return). This corporate bonds). Being a very-short-duration fund,
structure has helped us to mitigate credit risks thus far. the ultra-short fund has higher exposure to AA+ and
below rated papers as compared to the short-term
Across debt funds, you take swap exposures against plan. Being a very short-duration asset class, the ultra-
some portions of the portfolio, which we don’t see in short fund has more flexibility to have higher expo-
many other AMCs. Can you explain the rationale sure to AA assets.
behind this?
The overnight interest swap is used as a strategy to Your short-duration fund has tended towards the
hedge some of the duration risk. At certain points in higher end of the permitted duration band. What
time, hedging with an overnight interest swap is a could be the implications of the current portfolio
much more attractive strategy than selling the bond. positioning if the interest rates were to rise? What are
So, depending on the risk–reward, the fund uses this the risks for an investor with a near-term horizon of,
strategy to hedge portfolio duration risk. As an addi- say, 1.5 to two years?
tional strategy, it aids in generating alpha for the fund. The portfolio positioning since April has changed by
reducing the overall duration. The fund was running a
“The current interest regime largely higher duration. The fund currently is running a medi-
factors the pandemic slowdown and um duration, given that the expectation of recovery
has changed over the last three months. As of January
interest rates will have to normalise 2021, the fund has a Macaulay duration of 1.84 years
at some point in time.” and a modified duration of 1.76 years, with an average
maturity at 2.67 years. Since the fund has reduced
duration, the duration risk has been neutralised.
Mutual Fund Insight March 2021 23
Subscription copy of [[email protected]]. Redistribution prohibited.
TO BE PUBLISHED IN THE FIRST WEEK OF FEBRUARY 2021
Mail it to Value Research, C-103, Sector-65, Noida-201301, India.
Buy online at https://shop.valueresearchonline.com/store/
Subscription copy of [[email protected]]. Redistribution prohibited.
COVER STORY
How to
use the new
riskometer
to assess risk
For investors, ascertaining the risks
associated with their funds has thus far been a mirage.
SEBI’s new risk-o-meter is set to change that.
Subscription copy of [[email protected]]. Redistribution prohibited.
COVER STORY
Ashutosh Gupta, Sneha Suri
and Omkar Vasudev Bhat ;OL L]VS\[PVU VM YPZR NYHKPUN
Here is how SEBI has tried to indicate risk in mutual funds over the years
f we ask you what returns
your fund gave in the last
one year, you’ll probably
give an instant answer. But 7YVK\J[ SHILSSPUN 9PZR V TL[LY IHZLK VU M\UK
Iwhat if we ask you about its \ZPUN JVSV\Y JVKLZ JH[LNVYPLZ
)3<,
risk profile? Maybe some of you WYPUJPWHS H[ SV^ YPZR Moderately Moderate Moderately
might have some vague idea, but Low High
@,336>
most won’t bother to answer. For WYPUJPWHS H[ TLKP\T YPZR
long, mutual fund investors have
)96>5
based their fund selection only on WYPUJPWHS H[ OPNO YPZR Low High
performance numbers, while
ignoring the risk side of the LOW HIGH
equation, specifically on the fixed-
income side. Moderately
The problem is that unlike Moderate High
returns, which investors can easily 9PZR V TL[LY Low to
IHZLK VU [OL
measure, they’ve never really had \UKLYS`PUN Moderate High
any risk-assessment tool to aid WVY[MVSPV
them. SEBI made some half- Low High Very
hearted attempts to fill that void in
the past but they weren’t of much RISKOMETER
use. As a result, the most common
interpretation for investors has
been that the funds giving higher Now this problem is not unique overhauled risk-o-meter coming
returns were better investments, to the six Franklin funds, even into effect from January this year.
while those returning less were though they’ve become the poster Not only has the new, upgraded
poor. But returns convey only one boys for any discussion around methodology fixed the issues with
side of the story. Your impressions risk. Across many debt-fund the older one, it captures all
about a fund can change categories, there has always been a possible dimensions from which
dramatically the moment you wide variation on the risk the risks emanate.
factor in the risks. In fixed income, parameters. On the one hand, But before we talk about its
the risk has always been latent but there are funds which have utility in investment decision-
the happenings of the last two traditionally been more making, here’s some background
years have revealed the price one conservative. On the other, there about the origins of risk-o-meter
pays for the lack of its are the more aggressive ones, and what has changed.
appreciation. which assume far-greater risk in
Don’t believe us? Just trace back pursuit of returns. But because of >/(; 0: ( 90:2 6 4,;,9
the rapid growth in the asset sizes the absence of an objective, easy- (5+ /6> /(: 0;
of the six shuttered Franklin to-digest risk measure, investors */(5.,+&
schemes, whose fate now lies in have never been able to SEBI’s first attempt to grade the
the hands of the Supreme Court, distinguish between the two. risk in mutual funds started with
alongside their standout That is now set to change with the product-labelling system in
performance year after year. SEBI’s new and completely 2013, which used colour codes –
blue, yellow and brown –
0U MP_LK PUJVTL [OL YPZR OHZ HS^H`Z ILLU SH[LU[ I\[ representing low, medium and
[OL OHWWLUPUNZ VM [OL SHZ[ [^V `LHYZ OH]L YL]LHSLK [OL WYPJL high levels of risks, respectively
VUL WH`Z MVY [OL SHJR VM P[Z HWWYLJPH[PVU (see the box ‘The evolution of risk
grading’). That moved a step ahead
26 Mutual Fund Insight March 2021
Subscription copy of [[email protected]]. Redistribution prohibited.
0U [OL ]LYZPVU VM [OL YPZR V TL[LY :,)0 OHK MP_LK [OL YPZR SHILSZ MVY LHJO
M\UK JH[LNVY` HUK LHJO M\UK ^HZ ZPTWS` HZZPNULK [OL ZHTL YPZR SHILS HZ [OH[ VM [OL JH[LNVY`
)\[ PU YLHSP[` M\UKZ VM [OL ZHTL JH[LNVY` KPMMLYLK ^PKLS` VU YPZRZ
in 2015 with the introduction of to Moderate, Moderate, Moderately price for a fund manager. This is
the risk-o-meter, a pictorial High, High and Very High Risk. referred to as the impact cost. The
depiction of risk on a scale of five, In the new risk-o-meter, the risk higher the impact cost, the higher
ranging from ‘Low’ to ‘High’. In weights are assigned to the the risk value.
this avatar, SEBI fixed the risk underlying securities based on For debt funds, the risk factors
labels for each fund category and specific parameters which are considered are:
each fund was simply assigned the different for different asset classes. Credit risk: This reflects the
same risk label as that of the For equity, each holding in the possibility of a borrower to not
category. But in reality, funds of portfolio will be assigned a risk pay back. As you progressively
the same category differed widely value on the following three move down the credit-rating curve
on risks based on their underlying factors: from AAA to below-investment-
portfolios. For instance, you could Market capitalisation: A small-cap grade securities, this possibility
see huge variations in exposures to stock will have a higher risk value increases and so does the assigned
issuers with low credit ratings than a mid-cap stock, which in risk value.
among different funds and yet the turn will have a higher value than Interest-rate risk: The farther the
risk-o-meter would project them as a large-cap one. maturity of the bonds in a
being equally risky. So, it had little Volatility: Stocks which witness a portfolio, the higher the risk value
use for investors. higher magnitude of ups and on this parameter. That’s because
But the recent misadventures in downs on a day-to-day basis will the prices of long-dated papers
the fund industry prompted SEBI carry a higher risk ranking. react more sharply to the ups and
to significantly upgrade the risk-o- Impact cost (liquidity): Impact cost downs in interest rates. So, if
meter. As per the revised refers to the magnitude by which interest rates increase by 0.25 per
methodology, risk grades are the price of a stock moves as a cent, the bonds whose maturity is
assigned based on the underlying result of a large buy or sell farther away will fall more than
portfolio holdings of a fund. It has transaction. For instance, stocks the ones maturing in the near
also introduced a new risk label: which have low trading volumes term.
‘Very High’. Therefore, a fund can witness a significant jump in their Liquidity risk: This parameter refers
now be assigned one of the price if a big buy order is to the inability to sell a bond
following six risk grades: Low, Low executed, driving up the purchase before its maturity because of a
lack of buyers in the market. The
risk value is assigned on the basis
of a bond’s credit rating, whether
it is listed or not and how it is
structured (for example, whether
or not it carries any credit
enhancement). All these factors
contribute to the liquidity of a
bond.
Besides above, SEBI has
provided detailed guidelines on
assigning risk values to various
other asset classes such as
derivatives, gold, REITs, etc.
Once the risk values are
assigned to the different
parameters, the risk score at the
Mutual Fund Insight March 2021 27
Subscription copy of [[email protected]]. Redistribution prohibited.
COVER STORY
profile of Franklin’s closed funds),
9PZR WYVMPSL VM -YHURSPU»Z JSVZLK M\UKZ all funds are marked on a higher
The new risk-o-meter would have done a better job at identifying the risk risk scale. So, this new risk-o-
meter could have served as an
inherent in Franklin’s six shuttered debt funds.
early warning signal for investors
Category New risk-o-meter Old risk-o-meter had it been in force back then.
Credit Risk Very High Moderate Up-to-date: AMCs have to calculate
the risk grades on a monthly basis,
Dynamic Bond High Moderate which ensures that they don’t
Low Duration Moderately High Moderate become dated and irrelevant in
case the underlying realities
Medium Duration Very High Moderate change rapidly.
Short Duration Very High Moderate Prompt notifications: AMCs are
mandated to inform investors by
Ultra Short Duration Moderately High Moderate email and SMS whenever the risk
grade changes. Not only that, every
;OL UL^ YPZR V TL[LY MVY LX\P[` M\UKZ OHZ year, at the end of March, they also
have to disclose the number of
KPZHWWVPU[LK =PY[\HSS` HSS M\UKZ PU L]LY` LX\P[` JH[LNVY` times the risk level has changed
OH]L NV[ [OL º=LY` /PNO» YPZR [HNNPUN over the year. That should ensure
that investors come to know of
fund level is a simple average of the three risk parameters for debt these changes and they don’t get
different parameters. For schemes funds explained above, SEBI has buried under volumes of other
that invest in more than one asset given special power to the disclosures.
class, the risk scores of the liquidity score. As you know, the Therefore, the new methodology
respective asset classes are risk value for a debt portfolio is a makes the risk-o-meter an
calculated and added up. simple average of the credit-risk objective, easy-to-understand and,
value, interest-rate risk value and most importantly, a relevant
>/@ 0: 0; ( )0. :;,7 liquidity-risk value. However, if measure to evaluate and compare
-69>(9+& the liquidity-risk value is higher funds in terms of risk.
This revised risk-o-meter has a lot than the average of all three, then
going for it. the value of liquidity risk will be /6> <:,-<3 0: 0;&
Rooted in reality: As mentioned considered as the risk value of the Well, the answer to that question
earlier, it brings the risk grading debt portfolio. depends upon the ability of the
closer to reality by basing it on We think this is of great risk-o-meter to call out the funds
what the fund actually holds. significance because a lot of issues which assume greater risk than
Captures all dimensions of risk: We arise because of the inherent their peers. So, let’s look at some
believe that the chosen parameters mismatch between the liquidity actual numbers for equity and debt
reflect all the relevant ones that offered by debt funds versus the funds to find some answers.
contribute to the riskiness of liquidity that markets in corporate Equity funds
various asset classes. One can bonds, particularly the lower-rated To put it shortly, the new risk-o-
argue that this methodology misses ones, have to offer. Even in the meter for equity funds has
out on the concentration risk, i.e., much-publicised episode of disappointed. It fails to make any
the risk of investing too much in Franklin schemes, the fund house distinction between funds ranging
the securities of a single issuer. maintains that it’s the lack of from aggressive hybrids to passive
SEBI may want to consider it in a liquidity of the underlying large-cap index funds to small-cap
future upgrade but it doesn’t take portfolio, in the face of mounting funds or even sector funds.
anything away from the redemption requests, which led to Virtually all funds in every equity
comprehensiveness of the current their winding-up. If we look at category have got the ‘Very High’
framework. their risk grades as per the revised risk tagging (see the chart ‘Equity
The ‘liquidity’ master stroke: Among methodology (see the table ‘Risk funds as placed on the risk-o-
28 Mutual Fund Insight March 2021
Subscription copy of [[email protected]]. Redistribution prohibited.
Subscription copy of [[email protected]]. Redistribution prohibited.
COVER STORY
meter’). These results are
obviously far from satisfactory. The
level of risk inherent in a small- ,X\P[` M\UKZ HZ WSHJLK VU YPZR V TL[LY
cap fund versus an aggressive The current risk-o-meter
hybrid, which invests partly in classifies almost all open-end Moderate Moderately
High
debt, is clearly very different. But equity funds in the ‘Very
Moderate
the risk-o-meter fails to High’ category, which is Low to High
acknowledge that. not of much use for
While we still believe that there investors.
is nothing wrong with the Low Very High
underlying parameters chosen to
define the risk, it is the way the RISKOMETER
risk values are assigned and then
combined into an aggregate risk Figures represent the number of funds; Excludes funds suspended for sale
Note: All funds which were launched at end of 2020 have been excluded as they would have higher levels of
grade that needs a tweak. With the cash and may cause anomaly in the risk-o-meter representation
current rules, it appears to have
become a mathematical
improbability for any equity fund <S[YH ZOVY[ K\YH[PVU M\UKZ HZ WSHJLK VU
to have a risk level other than
‘High Risk’ or ‘Very High Risk’. So, [OL YPZR V TL[LY
investors will have to wait for the As per the new risk-o-meter,
next version before putting the most ultra-short-duration Moderate Moderately
High
risk-o-meter to some good use. debt funds bunch up under
Moderate
So, there you go. All the hype the ‘Low to Moderate’ Low to High
we had built up about the risk-o- risk grade.
meter so far has come down to a
nought. But wait. There’s more to Low Very High
this story.
Debt funds RISKOMETER
On the debt side, the risk-o-meter Figures represent the number of funds; Excludes funds suspended for sale
passes with flying colours. And
this is where it holds a lot more
relevance too. Debt-fund investors (UHS`ZPZ VM [OL \S[YH ZOVY[ K\YH[PVU JH[LNVY`
have witnessed frequent and
massive NAV markdowns since the Funds which have been giving higher returns are also placed higher on the
IL&FS fiasco in late 2018, followed new risk-o-meter.
by segregations due to industry- 35 z Low z Low to Moderate z Moderate z Moderately High
wide defaults and the winding-up
of six yield-oriented schemes. So, 30
the risks in debt funds have come 25
about in a substantial way in the
recent times. Exposure to AA and below rated papers (%) 20
The new risk-o-meter 15
disclosures are very informative.
For instance, let’s look at the 10
seemingly homogeneous and 5
fairly narrowly defined category
of ultra-short-duration funds (the 0 1.0 1.5 2.0 2.5 3.0 3.5
chart titled ‘Ultra-short-duration 6-month returns (%)
funds as placed on the risk-o- Returns as on January 29, 2021; Excludes funds suspended for sale and funds that haven’t completed six months;
Credit exposure as on December 31, 2020
meter’). Here, the funds spread
30 Mutual Fund Insight March 2021
Subscription copy of [[email protected]]. Redistribution prohibited.
Most funds in this category
+`UHTPJ IVUK M\UKZ HZ WSHJLK VU [OL currently have a Macaulay
YPZR V TL[LY duration of over four years. Now,
according to the methodology,
As per the new risk-o-meter, Moderately while the same risk score is
most dynamic bond funds Moderate High assigned for a portfolio duration
bunch up under the Low to of over four years, the risk-o-
‘Moderate’ risk grade. Moderate High meter clearly captures the credit
exposures (graph titled ‘Analysis
of the dynamic-bond category’).
Low Very High You may wonder why the fund
marked as ‘High’ (red bubble) is
RISKOMETER tagged so even though it has
Figures represent the number of funds; Excludes FoFs and funds suspended for sale much lower aggregate exposure to
AA & below papers than the
yellow bubbles. Well, that’s
because it goes deeper down the
(UHS`ZPZ VM [OL K`UHTPJ IVUK JH[LNVY` credit curve. So, while its
While the same risk score is assigned for the duration of over four years, percentage exposure may be lower,
the risk-o-meter clearly captures the credit exposures. all of it is in securities rated A and
z Moderate z Moderately High z High below, which are much riskier. So
Exposure to AA and below rated papers (%) 25 category – the credit-risk funds
35
here again, the risk-o-meter passes
our quality test.
30
Let’s take a look at one more
(see the chart ‘Credit-risk funds as
20
placed on the risk-o-meter’). A
15
category which is perceived to be
riskiest also has shades of grey.
10
5
fact that not all credit-risk funds
are alike.
0
0 1 2 3 4 5 6 7 8 9 The risk-o-meter brings out the
We placed the one-year returns
Macaulay duration (years) and the lower-rated exposure of
Portfolio data as on December 31, 2020
Excludes FoFs, funds suspended for sale and funds whose Macaulay duration is not available this category on the same graph
(see ‘Analysis of the credit-risk
across four risk grades. bunch up under the ‘Low to category’) and again noticed that
A further analysis reveals some Moderate’ tag, it has been effective the funds that generated higher
important implications for in calling out the outliers. returns ranked higher on the risk-
investors. Look at the graph titled Now let’s look at the risk-o- o-meter as well. Most of the funds
‘Analysis of the ultra-short- meters in the dynamic bond fund tagged ‘Very High’ are the ones that
duration category’, where we have category. This versatile category either have high exposure to
mapped the funds’ risk grades spans across three risk-o-meter securities rated A and below or
alongside their returns and tags (look at the graph ‘Dynamic those that are unrated. Of course,
exposures to lower-rated papers. bond funds as placed on the risk- the liquidity score also has a role
The data speaks for itself. Funds o-meter’) but most bunch up to play here.
that have delivered higher returns under ‘Moderate’. While the general trend shows
are also riskier on credit quality,
and the risk-o-meter has been able 6U [OL KLI[ ZPKL [OL YPZR V TL[LY WHZZLZ ^P[O MS`PUN
to pick those risk signals loud and
clear. Even though most funds JVSV\YZ (UK [OPZ PZ ^OLYL P[ OVSKZ H SV[ TVYL YLSL]HUJL [VV
Mutual Fund Insight March 2021 31
Subscription copy of [[email protected]]. Redistribution prohibited.
COVER STORY
the risk become too much?
There’s no one-size-fits-all
*YLKP[ YPZR M\UKZ HZ WSHJLK VU [OL answer to that. It has to be an
YPZR V TL[LY outcome of your investing needs.
There is a wide variation in Moderately You also need to think about your
the risk scores of the funds Moderate High willingness to pursue higher
Low to High risk. The events of the last one-two
in the credit-risk category. returns at the expense of higher
Moderate
years can be of great help as they
provide some real evidence of how
Low Very High wrong things can go, and whether
you are up for them, instead of
scenarios built up in the head or
RISKOMETER
Figures represent the number of funds; Excludes funds suspended for sale on a piece of paper.
Now does that disappoint you?
Were you hoping for a more
(UHS`ZPZ VM [OL JYLKP[ YPZR JH[LNVY` precise answer? Well, here’s one
that can bring more objectivity to
Funds giving high returns are also those high on risk using the risk-o-meter, though we
z Moderate z Moderately High z High z Very High admit it’s not the perfect one and
Exposure to AA and below rated papers (%) 90 of caution, here’s what you can do.
may not work in every situation.
But for those of you who want to
80
keep it simple and err on the side
70
60
For every debt category, you
50
would see one or the other risk
40
grade in which majority of the
funds bunch up. For instance, the
30
ultra-short-duration funds bunch
20
10
category, or the dynamic bonds
0
funds cluster up in the ‘Moderate’
-48 -42 -36 -30 -24 -18 -12 -6 0 6 12 18 up in the ‘Low to Moderate’
category. You can think of it as a
1-year returns (%)
Returns as on January 29, 2021; Excludes funds suspended for sale reasonable level of risk
Credit exposure data as on December 31, 2020; also includes unrated securities commensurate with the investment
mandate of that category.
that funds giving high returns are /6> ;6 <:, ;/, Therefore, you can use it as a
high on risk, there are quite a few 90:2 6 4,;,9 -69 benchmark or the reference-risk
funds which are giving negative level and compare it with the risk
one-year returns but are also +,*0:065 4(205.& grade of your fund. If your fund
ranked higher on risk. These are Now that the relevance of risk-o- moves a notch higher than this
the ones where the defaults/ meter in pointing out the risks in reference level, that’s the time to
downgrades have already debt funds is established, the big look at it more closely to
materialised, given their riskier question is – how can investors understand what’s contributing to
portfolio complexion translating use it in their investment decision- that additional risk.
into negative returns. making? At what risk grade does You can get a lot of the
-VY L]LY` KLI[ JH[LNVY` `V\ ^V\SK ZLL VUL VY [OL V[OLY YPZR NYHKL PU ^OPJO
THQVYP[` VM [OL M\UKZ I\UJO \W @V\ JHU \ZL P[ HZ H ILUJOTHYR VY [OL YLMLYLUJL YPZR SL]LS HUK
JVTWHYL P[ ^P[O [OL YPZR NYHKL VM `V\Y M\UK
32 Mutual Fund Insight March 2021
Subscription copy of [[email protected]]. Redistribution prohibited.
information you need on the fund
pages of Value Research Online.
Look at the break-up of the
portfolio by credit rating as well
as the data on the maturity
profile of the portfolio and
compare it with other funds in
the category (the screenshot titled
‘Credit Rating vis-à-vis Category).
Typically, these will point you to
where the risk is coming from.
And if that makes you too
nervous, look for alternatives or
else stay put even as you keep
monitoring. On www.valueresearchonline.com, you can compare a debt fund’s credit break-up
But if the risk grade of your with that of the category.
fund climbs two positions vis-à-vis
the reference grade, that’s when
your fund is assuming far more assumption to make. *65*3<:065
risk than is perhaps warranted. For The idea is to identify and steer While returns are there to
a lot of investors, that should be clear of the outliers. These are evaluate funds, investors didn’t
signal enough to look for safer often the ones that lure investors have any objective measure to
options. Just go back to the graph with their outsized returns. But look at risks. But this rejigged
titled ‘Analysis of ultra-short- unfortunately, they also run the risk-o-meter has filled this gap.
duration category’ and look at the most risk of turning toxic, thereby While the new mandate ends up
two funds which are two notches inflicting maximum damage. But being suboptimal in case of
higher (yellow bubbles) than the by anchoring yourself to the equity funds and needs to
reference-risk grade (light blue reference-risk grade, you can easily undergo some alteration, on the
bubbles). Did you notice their spot them and avoid them. fixed-income side, it is a great
substantially higher exposure to So, in any fund listing on Value enabler to compare the
lower-credit-quality papers? Research Online, make sure to go underlying risk of different funds
Now this reference-risk-grade to the Risk Stats tab and look at and weed out the ones that go
approach assumes that most funds the ‘Riskometer’ column before overboard. So, while you look at
in a category are fairly disciplined choosing a fund (see the returns, make sure to check the
and don’t go overboard on risk, screenshot titled ‘Assessing risk’). risk-o-meter to not get caught
making the modal risk grade a It will facilitate an easy unawares when risk knocks at
suitable benchmark for the comparison of funds as you’ll be the door.
acceptable level of risk. And we able to sort and differentiate them Having said that, we believe it
believe that’s a reasonable within categories. will realise its full potential when
it becomes a deterrent for AMCs
from assuming higher risk than is
(ZZLZZPUN YPZR warranted. And for that to happen,
you, the investor, will have to
contribute. Make sure that these
disclosures don’t go unnoticed. If
you see your fund climbing up on
the risk-o-meter, ask questions
from your AMC instead of turning
The fund listing on www.valueresearchonline.com tells you the risk-o-meter a blind eye to it. And if that
grade for all the funds in the category. persists, you may need to vote
with your feet.
Mutual Fund Insight March 2021 33
Subscription copy of [[email protected]]. Redistribution prohibited.
CATEGORY WATCH
ELSS: The perfect long-term
companion
Despite outflows in recent months, the AUM of tax-saving funds has continued
to climb to cross `1 lakh crore
he category of equity-linked months. A closer look reveals that ally meant for long-term invest-
saving schemes, or tax-sav- this has resulted from slower ments. One could have earned
Ting funds, is chugging inflows at the gross level, coupled negative returns in a block of three
along. It continued to be the with accelerated outflows. years during the recent market fall
third-largest category by AUM Although it is in line with the triggered by the nationwide lock-
among equity funds as on broader trend witnessed among down. However, in that case, the
December 31, 2020, managing equity funds, a reversal is expected lowest category median on a sev-
more assets than ever. Buoyed by in this last quarter of the financial en-year basis would have been
the momentum in equity markets, year when inflows have tradition- 7.80 per cent per annum.
the AUM of this category has ally peaked.
recently crossed the mark of `1 The dwindling popularity of ELSS
lakh crore. Although the category Invest with a long-term horizon With the possibility of some tax-
touched this level one year ago as Irrespective of the noise around payers opting for the alternate tax
well, it was short-lived, owing to outflows, ELSS funds continue to regime, the popularity of ELSS
the pandemic-induced market fall. be the most preferred tax-saving funds may get dented. Introduced
The ELSS category has achieved alternative for long-term investors. in the previous year’s Budget, the
this feat despite the fact that it has The roller-coaster markets of 2020 alternate tax regime has a lower tax
been experiencing net outflows for should not deter you from invest- rate but does not allow most of the
the past four months. That’s some- ing in these funds provided that tax deductions that are otherwise
thing you don’t see often in this you have time by your side. Even available, including the `1.5 lakh
category, certainly not of the mag- though ELSS funds have a lock-in deduction under Section 80C.
nitude being seen in recent period of three years, they are ide- Some investors ask if there’s
,3:: UL[ MSV^Z
The category has witnessed net outflows for the first time since 2014.
` 4,000 crore
3,000
2,000
1,000
0
-1,000
-2000
2014 2015 2016 2017 2018 2019 2020
Source: AMFI. Data for open-end funds.
34 Mutual Fund Insight March 2021
Subscription copy of [[email protected]]. Redistribution prohibited.
any merit in continuing with ELSS 4LKPHU YVSSPUN YL[\YUZ
even if they do not look to avail Staying invested for a longer period reduces the risk of volatility
the tax exemption. Perhaps not. A
comparison with multi-cap funds 35 % 3-year 5-year 7-year
(now flexi-cap) suggests that there 28
is no specific advantage one can 21
derive by choosing ELSS over
them. At the category level, there’s 14
hardly any difference in their 7
returns. On the contrary, you give 0
up on liquidity in the case of
ELSS. So, if you no longer need to -7
invest to save taxes, you can shift January 2011 December 2020
Data for open-end tax-saving funds
to flexi-cap funds.
,3:: ]Z MSL_P JHW M\UKZ! @ YVSSPUN YL[\YUZ
ELSS or NPS Tier II tax-saving
plan? A comparison with flexi-cap funds (erstwhile multi-cap) suggests that there is no specific
Some investors also enquire about advantage you derive by choosing ELSS over them, except the tax benefit.
the NPS Tier II tax-saving plan, 15% ELSS Flexi-cap
which was launched last year. 12
Even though it is grossly different
from ELSS on asset allocation, the 9
two still directly compete for a 6
share of one’s tax-saving invest- 3
ment pie. Unlike the ELSS which
is an all-equity product, the NPS 0
Tier II tax-saving plan invests only -3
10–25 per cent of your money in December 2019 December 2020
equity. Also, the latter is currently Category median of open-end direct plans
available only to central-govern-
ment employees. So, it may appeal you have only round-tripping ELSS funds can be painted with
to conservative investors who are money that has already been the same brush. There are plenty
employees of the central govern- invested in the markets, you need of reasonably priced ones as well.
ment and want only limited expo- not spread it out over a number of In fact, the range of expenses is
sure to equity. months and can reinvest it at one quite wide. If one looks at direct
But for a vast majority of inves- go. However, make sure that you plans, these ratios range from as
tors who can remain invested for don’t end up saddling yourself with low as 0.25 per cent to an outra-
the long term and can withstand capital-gain taxes while doing this. geous over 2 per cent.
the intermittent volatility, ELSS Of course, expenses tend to
should be the de facto choice. The expense factor reduce with an increase in size
In fact, investors who’ve experi- Now one thing that sits odd is the because SEBI prescribes a stepped
enced pandemic-induced financial expense ratio of many funds in the decrease in the maximum allowed
hardship (pay cuts, job losses, etc.) category. While several funds are expenses with a growing AUM.
and are unable to generate invest- charging over 1.25 per cent for the But that doesn’t mean that AMCs
ible surplus for saving taxes direct plan, some are even cannot voluntarily charge lower. In
should consider redeeming and charging over 1.5 per cent. At a fact, some AMCs take a lead in this
reinvesting some of their past time when index funds are giving by keeping expenses low even
investments to avail the tax their active counterparts a run for when their asset sizes are modest.
exemption. After all, the tax saved their money, these expense ratios Read on as we present to you our
is also money earned. And since are on the higher side. But not all favourites from this category.
Mutual Fund Insight March 2021 35
Subscription copy of [[email protected]]. Redistribution prohibited.
CATEGORY WATCH
List of tax-saving funds
REGULAR DIRECT
SIP return (%) Trailing return (%) Quartile ranking SIP return (%) Trailing return (%) Quartile ranking
Fund Rating 3Y 5Y 3Y 5Y 10Y ’16 ’17 ’18 ’19 ’20 Rating 3Y 5Y 3Y 5Y ’16 ’17 ’18 ’19 ’20
ABSL Tax Relief 96 Fund 10.18 9.86 3.98 11.74 12.53 11.16 10.93 5.01 12.86
Axis LT Eqt Fund 15.19 13.83 9.79 13.64 16.77 16.15 14.87 10.78 14.76
Baroda ELSS 96 Fund 12.10 8.66 2.11 9.50 8.77 12.85 9.49 2.87 10.41
BNP Paribas Long Term Equity 15.62 12.13 7.16 11.69 13.63 16.95 13.39 8.43 12.90
BOI AXA Tax Advtg Fund 19.48 15.57 7.50 15.09 12.61 20.73 16.90 8.73 16.57
Canara Robeco Eqt Tax Saver Fund 20.37 16.48 12.45 15.16 13.21 21.49 17.51 13.51 16.13
DSP Tax Saver Fund 15.92 12.81 6.98 14.12 13.59 16.98 13.92 8.02 15.26
Edelweiss LT Eqt (Tax Svngs) 11.94 9.57 3.15 9.99 11.25 13.76 11.23 4.86 11.49
Essel Long Term Advantage 9.36 8.16 3.30 9.96 - 11.20 9.99 5.08 11.81
Franklin India Taxshield Fund 11.90 9.10 3.87 9.86 12.22 12.88 10.12 4.86 10.94
HDFC Taxsaver Fund 7.53 6.47 -0.88 9.60 9.11 8.14 7.14 -0.24 10.32
HSBC Tax Saver Eqt Fund 11.29 9.15 2.02 11.22 11.60 12.51 10.23 3.08 12.23
ICICI Pru LT Eqt (Tax Saving) 13.38 10.94 6.57 11.05 12.34 14.18 11.89 7.43 12.18
IDBI Eqt Advantage 8.62 7.89 3.56 9.48 - 9.98 9.41 5.05 11.01
IDFC Tax Advtg (ELSS) Fund 14.32 11.76 3.05 12.72 13.01 15.51 13.01 4.27 14.02
Indiabulls Tax Savings 8.63 - 0.82 - - 10.21 - 2.09 -
Invesco India Tax Plan Fund 15.18 13.12 7.51 13.43 14.16 16.56 14.64 8.95 15.10
ITI Long Term Equity Not rated - - - - - Not rated - - - -
JM Tax Gain Fund 15.98 13.58 8.13 14.82 11.84 16.80 14.53 8.94 16.08
Kotak Tax Saver 15.38 12.54 7.84 13.87 11.63 16.73 13.91 9.13 15.35
L&T Tax Advtg Fund 9.67 8.80 1.46 11.66 11.04 10.28 9.48 2.09 12.41
LIC MF Tax Plan Fund 10.71 10.11 5.23 11.92 10.16 11.95 11.38 6.46 13.16
Mahindra Manulife ELSS Kar Bcht Yjn 11.83 - 2.81 - - 13.66 - 4.72 -
Mirae Asset Tax Saver 19.48 17.23 10.04 18.98 - 21.25 18.93 11.67 20.71
Motilal Oswal Long Term Eqt 11.71 10.78 3.40 14.13 - 13.12 12.24 4.75 15.70
Nippon India Tax Saver (ELSS) 4.75 2.70 -6.80 5.62 10.60 5.45 3.48 -6.08 6.50
Parag Parikh Tax Saver Not rated - - - - - Not rated - - - -
PGIM India Long Term Eqt 14.13 11.41 5.82 11.89 - 15.69 13.06 7.54 13.48
Principal Tax Svngs Fund 13.22 11.20 2.94 13.45 12.65 13.78 11.79 3.59 14.04
Quant Tax 27.51 19.64 13.53 18.49 11.72 29.35 20.92 14.97 19.44
Quantum Tax Saving Fund 11.59 - 3.22 10.30 10.57 12.06 9.18 3.61 10.64
SBI Long Term Equity 14.38 10.50 3.83 10.62 11.32 15.05 11.19 4.83 11.33
Shriram Long Term Equity Not rated - - - - - Not rated - - - -
Sundaram Diversified Equity 9.40 7.63 1.10 10.09 9.99 9.79 8.10 1.53 10.59
Tata India Tax Savings 13.29 11.49 5.25 12.77 13.36 14.87 13.00 6.75 14.25
Taurus Tax Shield Fund 11.14 10.85 4.99 12.71 10.15 11.91 11.60 5.72 13.56
Union Long Term Equity 16.00 11.85 7.15 10.47 - 16.48 12.43 7.64 11.22
UTI Long Term Equity 16.79 12.77 6.98 12.41 10.94 17.78 13.74 7.95 13.45
Comparatively newer fund; no long-term history available.
Performance Top quartile Second quartile Third quartile Bottom quartile
Consistency: = Among top 25% in the category = Among top 25–50% in the category = Among bottom 25–50% in the category = Among bottom 25% in the category
The left-most bar in a series represents the fund’s performance in the first quarter of a calendar year. Similarly, subsequent bars represent the fund’s performance in second, third and last quarters of the calendar year.
Funds marked in this colour are our recommended funds. Data as on January 31, 2021. Funds suspended for sale have also been excluded.
36 Mutual Fund Insight March 2021
Subscription copy of [[email protected]]. Redistribution prohibited.
FUND ADITYA BIRLA SUN LIFE TAX RELIEF 96 REGULAR DIRECT
ANALYST’S
CH ICE The aggressive choice
Launch aunched in 1996, this fund is most tenured fund managers in the
March 1996 one of the oldest in the category ELSS category.
Fund manager Land has beaten an average peer The fund follows a multi-cap
Ajay Garg
in as many as 14 years of the 24 strategy and its philosophy is to own a
complete calendar years witnessed by well-diversified portfolio of high-
it. In the process, it has compounded quality businesses. The stock selection
Expense ratio (%) its investors’ money at over 20 per is bottom-up, with an emphasis on
DIRECT cent per annum during this period. companies having strong moats. The
0.94 1.15
MIN FUND MEDIAN MAX While the fund has underperformed fund also integrates ESG
its peers in the last couple of years, (environmental, social and
0.25 2.04 we believe investors need to be governance) factors into portfolio
REGULAR patient given its illustrious long-term construction. But unlike most of its
1.86 2.28
MIN FUND MEDIAN MAX performance record. This has also peers in the category, this fund
been the period when the features sizeable exposure to mid
1.62 2.58
performance of mid and small caps, in caps, as well as select MNC stocks.
Trailing returns (%) which the fund invests substantially, Most of the time over the last five
Regular Direct S&P BSE 500 TRI has been much more muted in years, over 50 per cent of its assets
comparison with large caps. have remained invested in mid- and
10.21 Besides, it stands out for the small-cap stocks.
1-Year 11.15 stability of its fund manager. Ajay This fund is for aggressive
16.46
Garg has been managing it for 14 investors, who want sizeable exposure
3.98 years now, making him one of the to mid/small caps in their tax saver.
3-Year 5.01
6.76
Growth of `10,000 SIP `8.09 lakh | `8.31 lakh
11.74 10 lakh
5-Year 12.86 Regular Direct
13.83
8 lakh
76.74
Recent 78.09
rally 6 lakh
99.14
-32.87
Recent -32.83 4 lakh
crash
-35.60 `6.10 lakh
2 lakh Amount invested
Recent rally: March 23, 2020 — February 05, 2021
Recent crash: February 25, 2020 — March 23, 2020
Data as on January 31, ‘21. 0
Expense as on December 31, ‘20. February 2016 January 2021
REGULAR DIRECT
Year
2016 2017 2018 2019 2020 2021 (YTD) 2016 2017 2018 2019 2020 2021 (YTD)
Rating
Quartile 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
ranking*
Fund 3.42 43.12 -4.49 4.30 15.29 -3.30 4.33 44.71 -3.47 5.37 16.33 -3.23
return (%)
Category 4.58 38.40 -6.33 8.26 16.16 -1.36 5.57 39.81 -5.35 9.38 17.46 -1.27
return (%)
Investment style
Fund style Growth Blend Value Large Medium Small Capitalisation Category returns are for ELSS funds. *Quartile ranking means the quartile in which the fund appears when all the funds in the category are arranged in a descending order of
returns. YTD as on January 31, ’21. The ratings of direct and regular plans have been calculated separately in relation to their respective regular and direct peers. Hence, they
can be different. S&P BSE 500 index has been given only for comparison. It may not be the stated benchmark of the fund.
Mutual Fund Insight March 2021 37
Subscription copy of [[email protected]]. Redistribution prohibited.
FUND AXIS LONG TERM EQUITY FUND REGULAR DIRECT
ANALYST’S
CH ICE A sharp focus on quality
Launch look at its performance year increased it to more than 80 per cent
December 2009 after year over the last in the past few months. The
Fund manager Adecade is sufficient to remaining portfolio is invested in mid
Jinesh Gopani
explain why this fund is the biggest caps, with a very small allocation to
fund in the tax-saving category. The small caps. The portfolio is usually
fund has delivered top-quartile compact and has around 30–35 stocks.
Expense ratio (%) performance in most calendar years The fund underperformed its
DIRECT of its existence and as a result, benchmark only once (in 2016) and
0.73 1.15
MIN FUND MEDIAN MAX retained a five-star rating for almost category only twice (in 2016 and
its entire rated history. 2017) in its 11-year history.
0.25 2.04 Like most other equity offerings Otherwise, it has stayed ahead in
REGULAR from the Axis family, this fund also bull, as well as bear phases of the
1.62 2.28
MIN FUND MEDIAN MAX has a sharp focus on quality and it market. As a result, it has always
doesn’t mind paying a premium for it. maintained a good margin of
1.62 2.58
The fund hunts for superior and outperformance from an average
Trailing returns (%) scalable businesses with strong peer in any block of five years.
Regular Direct S&P BSE 500 TRI pricing power, high returns on capital Overall, Axis Long Term Equity is a
and secular growth. It maintained strong performer coming from a
11.37 large-cap exposure in the range of credible fund family. Invest if you are
1-Year 12.28 65–70 per cent since 2015, but looking for a high-conviction growth
16.46
stepped it up to about 75 per cent in portfolio for your tax-saving
9.79 late 2019 and has now further investments.
3-Year 10.78
6.76
Growth of `10,000 SIP `8.90 lakh | `9.13 lakh
13.64 10 lakh
5-Year 14.76 Regular Direct
13.83
8 lakh
75.04
Recent 76.32
rally 6 lakh
99.14
-31.43
Recent -31.40 4 lakh
crash
-35.60 `6.10 lakh
2 lakh Amount invested
Recent rally: March 23, 2020 — February 05, 2021
Recent crash: February 25, 2020 — March 23, 2020
Data as on January 31, ‘21. 0
Expense as on December 31, ‘20. February 2016 January 2021
REGULAR DIRECT
Year
2016 2017 2018 2019 2020 2021 (YTD) 2016 2017 2018 2019 2020 2021 (YTD)
Rating
Quartile 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
ranking*
Fund -0.69 37.44 2.65 14.83 20.52 -5.74 0.40 38.99 3.71 15.86 21.50 -5.67
return (%)
Category 4.58 38.40 -6.33 8.26 16.16 -1.36 5.57 39.81 -5.35 9.38 17.46 -1.27
return (%)
Investment style
Fund style Growth Blend Value Large Medium Small Capitalisation Category returns are for ELSS funds. *Quartile ranking means the quartile in which the fund appears when all the funds in the category are arranged in a descending order of
returns. YTD as on January 31, ’21. The ratings of direct and regular plans have been calculated separately in relation to their respective regular and direct peers. Hence, they
can be different. S&P BSE 500 index has been given only for comparison. It may not be the stated benchmark of the fund.
38 Mutual Fund Insight March 2021
Subscription copy of [[email protected]]. Redistribution prohibited.
FUND DSP TAX SAVER FUND REGULAR DIRECT
ANALYST’S
CH ICE A flexible approach
Launch he fund has done a pretty strong and provide long-term
January 2007 good job of beating an average compounding opportunities. But that
Fund manager Tpeer over the years. Its 10-year doesn’t mean that it goes overboard
Rohit Singhania
Charanjit Singh returns place it among the top five on expensive stocks. Unlike many of
funds in the category. It hit a bit of a its peers, the P/E ratio of its portfolio
rough patch in 2017 and 2018 when has hardly crossed 25 in the last five
Expense ratio (%) it found a place in the third quartile years.
DIRECT of the category. But it staged a great The fund maintains a well-
0.87 1.15
MIN FUND MEDIAN MAX comeback in 2019 to be ranked diversified portfolio of over 60 stocks
among the top three. and the allocation to large caps has
0.25 2.04 The fund doesn’t have a strong usually remained in a narrow range
REGULAR bias for either the growth or value of around 70 per cent in the last five
1.85 2.28
MIN FUND MEDIAN MAX styles of investing. Stocks are picked years. So, the portfolio is managed in
for the sustainability of their earnings a fairly conservative manner.
1.62 2.58
growth and return on equity. The Despite that, its track record
Trailing returns (%) fund is also open to taking positions suggests that the fund tends to fall
Regular Direct S&P BSE 500 TRI in stocks which present mispricing slightly more than the category
opportunities due to corporate average during bear phases but also
14.20 actions or relative to the company’s rises more than the category during a
1-Year 15.28 cash-generation ability. bull phase. But in any five-year
16.46
The valuations may take a back period in its life, it has remained
6.98 seat at times if business drivers are ahead of an average peer.
3-Year 8.02
6.76
Growth of `10,000 SIP `8.71 lakh | `8.95 lakh
14.12 10 lakh
5-Year 15.26 Regular Direct
13.83
8 lakh
93.30
Recent 94.92
rally 6 lakh
99.14
-35.25
Recent -35.21 4 lakh
crash `6.10 lakh
-35.60
2 lakh Amount invested
Recent rally: March 23, 2020 — February 05, 2021
Recent crash: February 25, 2020 — March 23, 2020
Data as on January 31, ‘21. 0
Expense as on December 31, ‘20. February 2016 January 2021
REGULAR DIRECT
Year
2016 2017 2018 2019 2020 2021 (YTD) 2016 2017 2018 2019 2020 2021 (YTD)
Rating
Quartile 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
ranking*
Fund 11.27 36.29 -7.60 14.83 15.05 -0.15 12.11 38.05 -6.72 16.00 16.14 -0.07
return (%)
Category 4.58 38.40 -6.33 8.26 16.16 -1.36 5.57 39.81 -5.35 9.38 17.46 -1.27
return (%)
Investment style
Fund style Growth Blend Value Large Medium Small Capitalisation Category returns are for ELSS funds. *Quartile ranking means the quartile in which the fund appears when all the funds in the category are arranged in a descending order of
returns. YTD as on January 31, ’21. The ratings of direct and regular plans have been calculated separately in relation to their respective regular and direct peers. Hence, they
can be different. S&P BSE 500 index has been given only for comparison. It may not be the stated benchmark of the fund.
Mutual Fund Insight March 2021 39
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FUND INVESCO INDIA TAX PLAN REGULAR DIRECT
ANALYST’S
CH ICE When safety is the priority
Launch he fund deserves a closer look constructing the portfolio. The fund
December 2006 for its consistency to beat an swings between market-cap segments
Fund manager Taverage peer, more so when the based on relative valuations.
Dhimant Kothari
Amit Nigam markets are going through a rough However, frequent fund manager
patch. In the last 13 calendar years, it changes are a bit of concern. Vetri
has underperformed an average peer Subramaniam (from December 2008
Expense ratio (%) only three times but never in a year till January 2017) and Vinay Paharia
DIRECT when the markets have crashed. In (June 2010–Mar 2018) had been its
0.90 1.15
MIN FUND MEDIAN MAX fact, in every such year (2008, 2011 long-time fund managers. After
and 2018), it was in the top quartile of Subramaniam’s exit, Taher Badshah
0.25 2.04 the category. The fund continued to co-managed it with Paharia for a brief
REGULAR display the same trait during the period. From March 2018, Amit
2.15 2.28
MIN FUND MEDIAN MAX quarter ending March 2020, when the Ganatra (who left in May 2020) was in
markets crashed due to COVID-19. charge, along with Dhimant Kothari.
1.62 2.58
This achievement should particularly Now after Ganatra’s exit as well, the
Trailing returns (%) appeal to investors who get anxious responsibility of building upon this
Regular Direct S&P BSE 500 TRI when markets fall. fund’s illustrious track record lies
The fund is managed with a with Kothari and Amit Nigam. A lot of
15.59 ‘growth at a reasonable price’ strategy. fund-manager changes are undesirable
1-Year 16.96 Stock selection is primarily bottom-up and though these haven’t impacted
16.46
but with an overlay of top-down the fund’s performance, it’s something
7.51 views and valuations while we would like to watch closely.
3-Year 8.95
6.76
Growth of `10,000 SIP `8.70 lakh | `9.03 lakh
13.43 10 lakh
5-Year 15.10 Regular Direct
13.83
8 lakh
84.85
Recent 86.81
rally 6 lakh
99.14
-34.57
Recent -34.51 4 lakh
crash `6.10 lakh
-35.60
2 lakh Amount invested
Recent rally: March 23, 2020 — February 05, 2021
Recent crash: February 25, 2020 — March 23, 2020
Data as on January 31, ‘21. 0
Expense as on December 31, ‘20. February 2016 January 2021
REGULAR DIRECT
Year
2016 2017 2018 2019 2020 2021 (YTD) 2016 2017 2018 2019 2020 2021 (YTD)
Rating
Quartile 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
ranking*
Fund 3.42 35.74 -1.24 9.43 19.16 -1.33 5.17 37.98 0.32 10.88 20.55 -1.23
return (%)
Category 4.58 38.40 -6.33 8.26 16.16 -1.36 5.57 39.81 -5.35 9.38 17.46 -1.27
return (%)
Investment style
Fund style Growth Blend Value Large Medium Small Capitalisation Category returns are for ELSS funds. *Quartile ranking means the quartile in which the fund appears when all the funds in the category are arranged in a descending order of
returns. YTD as on January 31, ’21. The ratings of direct and regular plans have been calculated separately in relation to their respective regular and direct peers. Hence, they
can be different. S&P BSE 500 index has been given only for comparison. It may not be the stated benchmark of the fund.
40 Mutual Fund Insight March 2021
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FUND MIRAE ASSET TAX SAVER FUND REGULAR DIRECT
ANALYST’S
CH ICE A champ in making
Launch he fund has remained in the state of the markets. The portfolio is
December 2015 top quartile in four of the five usually well spread out across 55-60
Fund manager Tcalendar years it has stocks. But the fund avoids companies
Neelesh Surana
completed thus far. In one year, it which lack a threshold scale, say of
missed the top quartile by a whisker. about `100 crore in operating profits.
The fund follows a ‘growth at a It also avoids taking cash calls and
Expense ratio (%) reasonable price’ strategy to pick usually remains fully invested.
DIRECT stocks. It prefers buying quality The fund has the makings of one
0.25 1.15
MIN FUND MEDIAN MAX stocks of businesses backed by of the most sought-after funds in its
strong cash flows, competitive category. It doesn’t yet have as long a
0.25 2.04 advantages and a decent return on track record as some of its peers, but
REGULAR capital employed. The fund is with Neelesh Surana at the helm, we
1.86 2.28
MIN FUND MEDIAN MAX disciplined about avoiding think it has what it takes to continue
overvalued growth stocks. building upon its strong start.
1.62 2.58
You can expect the portfolio to Its unbelievably low expense ratio
Trailing returns (%) always have a bias for large-cap of just 0.25 per cent for the direct
Regular Direct S&P BSE 500 TRI stocks, with 60–70 per cent of the plan adds further to its appeal. A lot
money usually invested in them. of its peers may find it almost
20.56 However, the fund exercises its impossible to match it on this front.
1-Year 22.40 discretion to increase its allocation Go for it for its disciplined and
16.46
beyond that, as it did in the financial diversified approach to growth
10.04 year 2018-19, depending upon the investing.
3-Year 11.67
6.76
Growth of `10,000 SIP `9.72 lakh | `10.01 lakh
18.98 12.5 lakh
5-Year 20.71 Regular Direct
13.83
10.0 lakh
106.48
Recent 109.28
rally 7.5 lakh
99.14
-35.72
Recent -35.66 5.0 lakh
crash
-35.60 `6.10 lakh
2.5 lakh Amount invested
Recent rally: March 23, 2020 — February 05, 2021
Recent crash: February 25, 2020 — March 23, 2020
Data as on January 31, ‘21. 0
Expense as on December 31, ‘20. February 2016 January 2021
REGULAR DIRECT
Year
2016 2017 2018 2019 2020 2021 (YTD) 2016 2017 2018 2019 2020 2021 (YTD)
Rating
Quartile 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
ranking*
Fund 14.80 47.88 -2.26 14.07 21.54 -0.53 16.63 49.80 -1.14 16.04 23.39 -0.40
return (%)
Category 4.58 38.40 -6.33 8.26 16.16 -1.36 5.57 39.81 -5.35 9.38 17.46 -1.27
return (%)
Investment style
Fund style Growth Blend Value Large Medium Small Capitalisation Category returns are for ELSS funds. *Quartile ranking means the quartile in which the fund appears when all the funds in the category are arranged in a descending order of
returns. YTD as on January 31, ’21. The ratings of direct and regular plans have been calculated separately in relation to their respective regular and direct peers. Hence, they
can be different. S&P BSE 500 index has been given only for comparison. It may not be the stated benchmark of the fund.
Mutual Fund Insight March 2021 41
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THE PLAN
‘Where and how much should I invest
for my child’s higher education?’
While it’s difficult to precisely determine the amount needed, one should start
investing early in equity. Revisiting the goal periodically can help reduce the gap
between the required amount and the accumulated corpus.
Ashish (39) works with an IT company and has a now concerned about accumulating a sufficient
monthly in-hand salary of close to `1 lakh. Apart corpus for his five-year-old daughter’s (Myra)
from a home loan EMI of `22,000, his monthly higher education. He wants to know how to go
expenses are `50,000. Although Ashish has been about investing for this goal and how to determine
making investments for quite some time, he is a target amount that would be sufficient.
0UJVTL HUK 0U]LZ[TLU[Z `
L_WLUKP[\YL Bank account and FDs 6.5 lakh
`
Monthly income Monthly expenses Home loan EMI Surplus EPF7.3 lakh
1 lakh 50,000 22,000 28,000 Equity funds 3.2 lakh
EDUCATION COSTS WHAT TO DO
VARY DRAMATICALLY Start early and Re-visit the goal periodically:
z Ashish would likely need the money in 12–15 years. invest as much as Initially, he may not have any
While starting to invest for this goal is appropriate, it possible: With clear idea about Myra’s career
is difficult to determine the amount required. the goal being so choice. However, slowly, he will
z Education costs vary dramatically, depending on a obvious, it is start having a better vision of it.
number of factors: the education stream, whether or important for Then, he can revisit this goal and
not the child wants to study abroad, type of Ashish to start make the required correction.
institution, etc. investing for it as >O` `V\ ZOV\SK Z[HY[
early and as
z Also, given the growing popularity of new-age much as PU]LZ[PUN LHYS`
career options, it is quite likely that many new possible. By doing The later you start, the less corpus you will be
options will emerge in the next 10 years with totally so, he would get able to accumulate. Hence, start investing early.
different cost structures. enough time to How much would you accumulate
in a time frame of 15 years?
0UKPJH[P]L YHUNL VM H]LYHNL accumulate a Starts 77.78 In ` lakh
OPNOLY LK\JH[PVU JVZ[Z PU 0UKPH significant After
Now
Costs vary depending on a number of corpus while 1 yr 65.38
factors such as the type of institution – reaping the After 54.67
government, private or a premier college benefit of 2 yrs
After
Stream z Cost as of today (`) 3 yrs 45.45
z Cost after 15 yrs* (`) compounding. After 37.53
Medical 5 to 20 lakh There is no harm 4 yrs
After
education 12 to 48 lakh if he ends up 5 yrs 30.73
Commerce and 1 to 5 lakh accumulating a After 24.91
6 yrs
arts education 2.4 to 12 lakh larger corpus After 19.94 Assuming a
Management 5 to 15 lakh than the actual 7 yrs monthly SIP of
After
12 to 36 lakh requirement, but 8 yrs 15.72 `10,000, return of
12 per cent pa, and
Engineering 5 to 15 lakh he definitely After 12.14 SIP contributions
9 yrs
increasing by 10
education 12 to 36 lakh doesn’t want to After 9.11 per cent yearly
*Considering inflation at 6 per cent pa fall short of it. 10 yrs
42 Mutual Fund Insight March 2021
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INVEST IN EQUITY HOW ABOUT AN EDUCATION LOAN?
z For wealth creation, it is recommended to invest in z Also consider taking an
equities for long-term goals, which are at least five years education loan to partly finance
away. your child’s higher education.
z Ashish may use flexi-cap mutual funds for this purpose z Since an education loan is
or even aggressive hybrid funds if he gets anxious about paid back by the child when he/
market movements. Aggressive hybrid funds invest about she starts working, this helps
20–35 per cent of the portfolio in fixed income to cushion your child become more
the impact of volatility, without compromising much on responsible and appreciate the
long-term returns. importance of money.
z It is not important to invest
in child-specific investment DON’T IGNORE YOUR OWN RETIREMENT
products as they do not offer
any additional advantage. It z Ashish’s mandatory provident-fund deductions
is a marketing gimmick to may not be enough to accumulate a sufficient
portray them as an retirement corpus.
investment product for a
crucial goal. Any investment z Given the current expenditure and an
avenue can be used for this goal as assumption that Ashish would stop earning at the
long as it suits your investment horizon and risk age of 60, he would need a retirement corpus of
appetite. The underlying investment is what you little more than `4 crore to maintain the same
should look at. lifestyle at an inflation-adjusted level up
to the age of 85. But his mandatory
z By investing in some child-specific plans, Ashish may EPF contributions will fetch him
get a tax deduction under Section 80C. But even for that around `1.73 crore only (assuming an
purpose, it is better to invest in tax-saving equity mutual average return of 8 per cent and an
funds. annual increase of 10 per cent in
z Traditional saving avenues like the Public Provident EPF contributions). An SIP
Fund (PPF) and Sukanya Samriddhi Yojana (SSY) invest of about `12,000 is required
only in fixed-income avenues and are likely to generate to meet the deficit
less returns over the long term as compared to equity (assuming 12 per cent
mutual funds. Both these products also score less on annual return, with
liquidity. Further, SSY is meant only for the girl child. contributions growing at 10
per cent per annum).
z However, one must start redeeming systematically from
equities at least 18 months to two years before the goal to z Ashish should, therefore, continue to invest as
avoid any negative surprises, should the market fall. much as possible in equities and if required,
encourage his daughter to partly finance the
education cost through a loan.
DON’T FORGET THESE
z Maintain an emergency corpus equivalent
to at least six-month expenses (including EMIs)
in a combination of sweep-in FD and liquid funds.
z Buy adequate health insurance for all your
family members, which should be independent
of the one provided by the employer.
z Life insurance is a must if you have financial
dependents. It should be sufficient to take care of
their living expenses and any other non-negotiable
goals in your absence. For this purpose, consider
only pure term plans. Traditional insurance
schemes that combine insurance and
investment provide neither adequately.
Mutual Fund Insight March 2021 43
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ASK
EXPERT ADVICE
What’s wrong with liquid funds? Segregated portfolios
Why are liquid funds not performing? What are considered as the date and cost
Should I hold my investment in liquid funds of acquisition of segregated portfolios for
or withdraw and invest in FDs? the tax purpose?
– NIKUNJ JALAN – AJIT GUPTA
Liquid funds are not yielding as much Your date of acquisition for a segregated
Liquid funds are returns as they used to until the recent portfolio would be the original date of
not yielding as past because the interest rates have fallen investment in a fund. Let’s say you invest-
much returns as substantially. Therefore, while till recent- ed in a bond fund about five years back
they used to until ly, liquid funds were able to offer mean- and about one year back, there was a credit
the recent past ingfully higher returns than a savings event because of which the fund had to
because the bank account, in the recent past, that mar- segregate a certain portion of the portfolio.
interest rates gin has dropped substantially. Now one year down the line, let’s say the
If you have an investment horizon of
have fallen more than one year, liquid funds are not a fund has been able to recover that amount
which it had to segregate and pay it back
substantially
suitable category of funds anyways. You to you. So, your tenure of holding for even
should look to move your money to a the segregated portfolio would be consid-
short-duration fund. Over a timeframe of ered as this entire five-year duration.
two to three years, short-duration funds As for the cost of acquisition, the origi-
can also yield potentially better returns nal cost of acquisition of the units of this
than an FD. fund would be split between the main
portfolio and the segregated portfolio in
Investing in NFOs the ratio of the NAVs of the main portfolio
Is it advisable for an investor, who’s been and the segregated portfolio on the date of
investing in mutual funds for the last five segregation. Let’s say you have a fund
years, to invest in new fund offers? I’m of- whose prevailing NAV is Rs 95, out of
ten approached by relationship managers which Rs 5 is contributed by certain
For all practical to switch to an NFO. bonds which are distressed and the fund
purposes, one - ROHIT KUMAR company decides to segregate these dis-
should stick with New fund offers make sense only if they tressed bonds into a segregated portfolio.
the old and more offer something unique which existing So, you will end up with two portfolios –
established funds mutual funds are unable to provide. But the main portfolio, whose NAV would be
and avoid such NFOs are very rare. So, for all practi- Rs 90, and a segregated portfolio, whose
investing in NFOs cal purposes, one should stick with the NAV would be Rs 5. Thus, the ratio of
old and more established funds and avoid your main portfolio to the segregated port-
investing in NFOs. folio on the date of segregation is 90:5 and
Also, just bear in mind that when rela- in course of time, when you are to redeem
tionship managers ask you to switch from these units, your original cost of acquisi-
an existing fund to an NFO, more often tion of these units will be bifurcated in
than not, it ends up serving their interests this 90:5 ratio to calculate the cost of
more than yours. So, you should really acquisition of the main portfolio and the
avoid the temptation to switch from an segregated portfolio. Accordingly, the tax
established fund to an NFO. liability will be calculated.
44 Mutual Fund Insight March 2021
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Lack of mid/small-cap ETFs and returns. But dynamic bond funds may not
index funds be a desirable investment option, given It’s relatively
What is the reason that most ETFs and the scale of volatility involved and the more difficult to
index funds are in the large-cap space price that you have to pay if the fund replicate mid-
only? Why don’t we have them in the mid- manager goes wrong (which has quite and small-cap
or small-cap space? often been proven in the last 10 years).
– AJAY Depending on your investment time indices due to
That’s because it’s relatively more difficult frame, you could choose a liquid fund/ the limited
to replicate mid- and small-cap indices due short-duration fund or a high-quality cor- liquidity of
to the limited liquidity of many of their porate bond fund. Don’t move anywhere many of their
underlying stocks. If a mid- or small-cap beyond high-quality. You must be far underlying
index fund receives large inflows, it won’t more careful and cautious while selecting stocks
be able to deploy that money readily. The your fixed-income investment option.
other problem is that of the impact cost:
when you buy stocks of small, relatively How equity funds will fare
illiquid companies in a large quantity, the I have already lost a lot of money in equity.
act of buying can drive up the index. Do you think equity funds will still give
On the other hand, the Nifty and good returns in the next 10 years?
Sensex are easy to replicate, as they com- – JASMEET SINGH
prise the top 50 and top 30 companies, You should not miss the opportunity of
respectively. These companies are highly learning from the loss. Try and figure out
liquid and if the funds replicating such what happened – did you invest a lump
indices receive large inflows, they will be sum? Or did you try to time the market?
able to deploy the money easily, without You can improve the probability of a
incurring any impact cost. favourable outcome from equities by hav-
ing an investment plan, such as staggering
Investing in dynamic bond funds your investment through SIPs, making To make money,
What is your view about investing in dy- sure that you are diversified and making you also have to
namic bond funds, as here investors need sure that you are not trading in the deriv- make sure that
not worry about the duration of the bond? atives or speculating. you don’t lose a
– KISHORE While equity markets should do well lot of money
Yes, that is the claim of dynamic bond over the next 10 years, there will also be
funds. But the real problem is associated ups and downs. If you come only at the
with the flexibility they have in terms of uptime but don’t invest through the down-
their interest-rate views. Their calls can time and if you don’t invest in good com-
well go wrong and that too during some panies or a good portfolio or a good mutu-
critical occasions. al fund, it won’t work. So, having a plan
Further, since you are investing in a and sticking to it are really important. To
fixed-income fund, it shows that you are make money, you also have to make sure
risk-averse and looking for predictable that you don’t lose a lot of money.
A webinar series to discuss An Investor Education & Awareness Initiative by
savings and investment issues
and answer your questions
To post your query, visit: www.ValueResearchOnline.com/Hangouts
Mutual Fund Insight March 2021 45
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DON’T PUT OFF
TAX SAVING TILL
THE LAST MINUTE
Everyone knows that spending sensibly and saving
regularly is key to financial security. Yet, many are not
able to save as much as they want to. People who fail to “The main problem with today’s
save, mostly have a steady income and are well-informed
about the importance of saving, yet they are victims of generation is that they never feel
their own aspirations. The emotions attached to money they have enough to save.”
decisions often makes cutting back on spending tough.
They simply cannot do the right thing and invest in
saving tax even though they often, feel guilty about not
doing it. But truth to be told, one needs to understand meet at different life stages. This efficient tax planning
that investing in tax-saving instruments is important not should ideally be done at the start of the year. To go easy
just for the time being but also for the long run.When one on the pocket, one can start something as simple as an SIP
invests in a tax-saving instrument, they save tax and at in ELSS. It ensures regularity and discipline of investment
the same time save up for the various goals they need to while serving the purpose of saving tax.
ELSS Benefits of Investing in Equity
The smart way of Linked Savings Scheme (ELSS)
saving tax +
Reduce Tax Growth
Under Section 80C of the Liability Potential
Income Tax Act, ELSS helps Lowest Lock-in
in tax savings of up to 64,116* Period
The individual is assumed to earn a taxable income of more than Rs. 5 Crore. The effective tax rate is 30% marginal tax + 37% surcharge on the tax rate + 4% Health and Education cess = 42.74% i.e. highest marginal
tax bracket. The individual is assumed to utilise the complete tax deduction limit of Rs.`150,000 per financial year under Section 80C. This deduction is allowed to an Individual or an HUF. This is only to illustrate the
tax saving potential of ELSS and is not a tax advice. Please consult your tax consultant for tax purpose. *This is applicable assuming the person is in the old tax regime. The Finance Bill, 2020 has proposed a New
Personal Tax Regime where most of the deductions/exemptions such as section 80C, 80D, etc. are to be foregone. This is however optional.
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