10 Things to be considered while choosing the best MF
Be it equity funds, tax saving funds or debt funds; there has to be a clear methodology to choosing the best mutual funds. Here is a 10-point checklist to decide upon the best mutual fund for you.
- Choose the fund that best fits into your long term goals
This litmus test of mutual funds is where you start. Your choice of fund should not be based on, “Is the fund good enough”? On the contrary, it should be judged by the question, “Is this fund good enough for me”? Look at every fund from the perspective of your own goals. Look at your return requirements, risk appetite, tax status and liquidity needs. These personalised questions will ultimately determine the selection of the mutual fund.
- Key to mutual fund selection is consistency
Would you prefer a fund where annual returns varied from 22% to 4% or another fund that consistently earned around 15% per annum? The answer is obvious because the latter fund is more consistent and hence more predictable. While the past need not always reflect the future, you can reliably believe that a fund which has been consistent for last 5-10 years will continue to show consistency in future too.
- Are fund management skills contributing to returns?
The most elementary measure is outperformance of the fund returns over the benchmark index. But that tells you just one side of the story. The bigger question is if the fund manager has worked hard for the returns? Beware of fund managers who outperform the benchmark by taking on inordinate risk. Outperformance must come from skill.
- Costs matter, so look for the expense ratio advantage
If you think expense ratios do not matter in debt funds or that expense ratios do not matter in equity-funds in the long term, you are mistaken. John Bogle of Vanguard is known for creating the index fund that saved billions of dollars for US investors in the form of lower expense ratios. Irrespective of whether you are investing in an equity fund or a debt fund, compare with peers and select the fund that offers performance with lowest expense ratio.
- Size and pedigree of the AMC matter too
Small funds can easily outperform but the test is when you become a large fund. That is when momentum works against the fund. Despite outperformance by smaller funds, ideally stick to larger funds that have been around for over 15-20 years in the business. Firstly, you can be assured they have gone through cycles in business. Also, larger funds with bigger AUMs are likely to remain in business for the long haul. Smaller funds are more vulnerable to shocks as we saw in the case of JP Morgan Fund, Dundee Mutual Fund and Alliance.
- All mutual fund classes need diversification
How effectively is the fund manager diversifying risk? The purpose of investing in mutual funds is to create a diversified portfolio. You do not need a professional fund manager to come and substitute your risk. Risk has to be mitigated and that is only possible through diversification. This applies to equity funds, debt funds and even money market funds.
- Look at fund performance in risk-adjusted terms?
Returns must be viewed in risk adjusted terms. Total return of 15% with low volatility is better than 17% returns with high volatility. You need funds that outperform the index funds over a longer period of time otherwise you are better off staying invested in passive funds like index funds and ETFs. That is where the Sharpe and Treynor ratio come in. You can also look to further refine your analysis with Fama analysis.
- Longevity of fund management teamis a crucial factor
Why does longevity of management matter? It brings about consistency in investment strategy and a better sync between the dealers, traders, researchers, the CIO and the CEO. Fund managers stay on in a fund if they are happy and if the fund is performing well. Funds that perform better have stable fund management teams ensuring continuity decision making.
- Check for the exit loads and the tax implications
If you sell equity funds before a period of 1 year they attract STCG tax at 15% while debt funds sold before 3 years will attract STCG tax of 30% (peak rate). Similarly, equity funds LTCG gains were tax-free but from April 01st 2018 any gains in excess of Rs.1 lakh will be taxed at a flat rate of 10% without indexation. Exit loads range from 0.5% for larger funds to 1% for smaller funds and impact return on investment.
- Has the fund been proactive in its approach?
Has the equity fund manager managed to move into winners early and move out of losers early? Your fund manager may not catch every trend in the market but as long as he catches the key trends it is good. In case of a debt fund, has your fund manager been able to tweak the maturity of the portfolio based on interest rate expectations.
Your mutual fund may not meet all the criteria but if majority of the criteria are met, you are absolutely good to go.
Everything you need to know about Burger King IPO
Through the IPO the company aims at raising ?810 crore. Of the total amount the promoter entity QSR Asia Pte Ltd will sell up to 60 million shares, which would amount to ?360 crore while a fresh issue of shares will aggregate to ?450 crore. The company has also raised a pre-IPO funding of ?92 crore from public markets investor Amansa Investments Ltd at ?58.5 per share.
Burger King IPO details at a glance
Dec 2, 2020 - Dec 4, 2020
Finalisation of Basis of Allotment
Dec 9, 2020
Initiation of refunds
Dec 10, 2020
Transfer of shares to demat accounts
Dec 11, 2020
Dec 14, 2020
Offer for Sale
?10 per equity share
?59 to ?60 per equity share
Min Order Quantity (each lot)
250 Equity Shares
Min Amount Cut off
Maximum Lots allowed
3250 Shares (13 lots)
Want to know our suggestion? Read here - Burger King IPO Note.
Things you need to know:
Burger King India Limited is one of the fastest growing international QSR chains in India during the first five years of operations based on the number of restaurants. Talking about the global presence, when measured by the number of restaurants, with a network of 18,675 restaurants in over 100 countries, Burger King is the second-largest fast food burger brand globally. In India, the company owns 261 restaurants which include eight Sub-Franchised Burger King Restaurants, across 17 states and union territories and 57 cities across India.
Burger King India has exclusive franchise rights in India and a strong customer value preposition. Apart from the customer loyalty and brand value, strong management and a vertically scalable supply chain are the company’s key strengths. The company will use the funds raised through the IPO to finance the roll-out of new company-owned Burger King Restaurants, repayment or prepayment of outstanding borrowings and to meet the general corporate purposes.
If you are looking for the short-term gains through the IPO, you need to bear in mind that if there is a spike in the Covid cases and there is another round of lockdown, then the business might take a hit. The termination of the Master Franchise and Development Agreement could also pose a threat to the business. Lack of identification of the locations when expanding in new regions, and deteriorating relations with third party delivery aggregators apart from perceived and real health concerns along with shifting food preferences and habits are a few things to look for. Having said that, the investment would turn out to be promising in long term.
This year has seen a lot of good IPOs, which has encouraged a lot of new investors to enter the markets. Apart from Burger King, the other companies that issued IPOs this year include SBI Card, Rossari Biotech, Mindspace Business Parks REIT, Route Mobile, Happiest Minds Technologies, Angel Broking, Chemcon Speciality Chemicals, Computer Age Management Services, Mazagon Dock Shipbuilders, UTI AMC, Likhitha Infrastructure, Equitas Small Finance Bank and Gland Pharma.
How to apply for Burger King IPO?
- In 5paisa Trading App, go to IPO Section reflected on the home screen
- Click on Apply IPO
- Enter Quantity and Price to bid for
- Enter UPI id to block funds on
- Later in the day you will receive funds block confirmation in your UPI app, which needs to be approved
If you are not a 5pasia customer, you can apply for the IPO using any supported UPI apps. Click here to find the list of UPI apps and banks supporting the IPO application.
Watch the video below to know more about the Burger King IPO
Union Budget 2020 – What’s It All About?
Budget 2020 was rich on expectations but the exemptions in the budget were much lower than what the market desired. The impact was visible in the performance of the stock market indices which cracked in response. While a detailed analysis is still due, the immediate reaction of the market appears to be that there was no big bang announcement in the Union Budget despite the tough macro conditions. Here are some of the major announcements in the Union Budget 2020.
Response to macro pressures
Nominal growth for fiscal year 2020-21 has been pegged at 10%. The real rate of GDP growth could be in the range of 5.5% to 6% depending on the nominal growth actually achieved as even 10% does look quite steep at this point in time.
The budget 2020 has fully utilised the 50 bps leeway on fiscal deficit offered by the N K Singh Committee. For 2019-20, the fiscal deficit has been pegged at 3.8% instead of 3.3% while for the fiscal year 2020-21 it is pegged at 3.5% instead of 3%.
There is some positive impact on post-harvest infrastructure. To improve post harvest infrastructure, including cold storage, the budget has announced viability funding based on public-private-partnership. Indian Railways will run dedicated trains to support the cold chain plan.
Some cheer for Corporates and MSMEs
Despite the lack of any cost advantage, the Budget 2020 has outlined big plans for manufacture of mobile phones and electronic equipment and semiconductor packaging. In addition, the 15% concessional tax will be extended to the power sector too.
Finally, MSMEs have something to be really pleased about. Invoice financing via the factoring method will be extended to MSME as will be the issue of subordinated debt to MSMEs and handholding in the early stages.
No cheer for markets and that was evident
LTCG on equity stocks and equity funds was not scrapped, despite the STT being introduced in 2004 in lieu of LTCG tax. This is resulting in the cascading effect of STT plus LTCG tax and that is adding to the costs of traders and investors.
While DDT has been scrapped on equity and on equity funds, it comes back in another form. At the same time, the dividend distribution tax on debt funds will continue as before. There will be a single point of taxing dividends as other income at the applicable peak rates of tax for individuals.
Efforts are being made to reduce tax burden on middle class. People earning in the range of Rs.5 lakh to Rs.15 lakhs will see reduction in taxes.
Direct tax; more complicated than effective
Direct tax regime has suddenly become a lot more complicated. There will be two regimes; first regime will focus on status quo with all exemptions and rebates. The new regime with lower rates applicable will be devoid of exemptions and rebates. Loss of exemptions could be a big cost as many exemptions are virtually mandatory or inevitable like life premiums, provident fund, tuition fees, home principal etc.
Under the new tax regime, direct taxes will be as under:
5l to 7.5l
7.5l to 10l
10l to 12.5l
12.5l to 15l
Tax Rate (%)
Above table represents the new regime. If you opt for the second option, then your IT form will be auto-filled. That simplicity appears to be the only visible advantage.
Hurled by the IPO Rush? Here’s All You Need to Know About ASBA
ASBA (applications supported by blocked amounts) was introduced by SEBI to protect the interests of the retail investors. ASBA can used to apply for IPOs, FPOs, rights issues etc. In ASBA, the designated bank account only gets blocked to the extent of the application money. On the date of allotment, the amount gets debited to the extent of allotted shares and the balance gets released. If zero shares are allotted to the applicant, then the entire blocked amount under ASBA is released.
Who can make an ASBA investment?
ASBA is mandatory for all IPOs after January 01st 2016. However, an ASBA investor has to fulfil some basic conditions.
- He must be a resident individual applying under the Retail Quota
- Bid must be at cut-off price with a single option of number of shares bid
- ASBA application has to be made through self certified syndicate bankers (SCSB)
- Such price intibid made in ASBA cannot be revised later on
- ASBA cannot be used for other categories like employees / shareholders etc.
What are the advantages of ASBA?
ASBA comes as a major boon to retail investors. Here are some of the major advantages.
- Since the amount is only blocked, you continue to earn interest
- You don’t worry about refunds as only the allotment money is debited
- The application process is very simple and you can apply through your bank
- The blocked amount is included in average quarterly balance (AQB)
- Even through bids cannot be revised, they can be cancelled.
How can an ASBA application be cancelled?
While an ASBA application cannot be revised as per the rules, the ASBA application can certainly be cancelled. There are two distinct situations here. If the IPO has not closed, you can cancel the ASBA application through your online trading account or through the bank. Your SCSB will cancel the bid and unblock the amount right away. However, if you withdraw after the issue closes, then you have to write to the registrar to cancel the bid. The SCSB will only remove the block after the allotment is complete and they get intimation from the registrar.
Here’s All You Need to Know About Getting a Demat Account
Demat Account is almost like a bank account. Just like you hold funds in your bank account, you hold shares and other securities in the Demat Account. Having a Demat Account is mandatory for trading in equities as per SEBI regulations.
How to open Demat Account?
Demat Account can be opened online or offline. It is normally opened along with trading account (TCD) by the broker. Demat Account can be opened with any authorised depository participant (DP); which could be a bank or a broker. Here is how to open a Demat Account.
For offline Demat Account, you need to fill up the demat form and sign the demat agreement and submit to your DP. Basic documents like PAN Card, Proof of identity, Proof of residence and cancelled cheque are required. Copies of self-attested documents must be submitted to the DP along with the signed DP agreement. Carry the originals for verification by the officer. Demat account opening can take up to 4-5 days, if all the documents are in place.
Online Demat Accounts can be opened by filling up the online form on the DP website. You must authenticate your identify and address with your Aadhar Card and verify the same with OTP sent to mobile. An in-person-verification (IPV) has to be done before fully activating the demat account. Only Aadhar address will be considered for online demat.
How to use the Demat Account
With a demat account, your purchase, sale and holding of securities are in electronic mode. You must issue a signed Debit Instruction Slip (DIS) to sell shares or you can give a power of attorney (POA) to the broker. When you sell shares, the demat account gets debited and when you buy shares the demat account gets credited. All corporate actions like bonuses and splits are automatically credited to your demat account. Dividends are directly credited to the mapped bank account.
Documents Required for Demat Account
As stated earlier, demat account opening requires proof of identity and proof of address. Proof of identity can be any statutorily issued photo identity like passport, Aadhar, driving license, voter card etc. Proof of address can be any of the above with complete and latest address or electricity or land line bill. In case of online demat account opening, the Aadhar address will be considered. In addition, submission of PAN card and cancelled cheque are mandatory for opening demat account.
Importance of having a Demat account
Here are some of the key uses of having a demat account.
1. It facilitates non-physical holding of securities
2. Demat account can hold equities, bonds, ETFs, gold bonds and other securities
3. Corporate actions are automatically executed in demat account
4. One point intimation of change in address, email, mobile to all companies
5. Eliminates risk of physical holdings like bad delivery, mutilation of certificates, loss in transit, forgery, fake certificates etc.
6. Trading shares, holding in demat and bank transfers become one seamless chain if you opt for online trading
7. Demat is also cost effective compared to dealing in physical certificates
5 Multi-bagger stocks for the next 5-years
The Indian benchmark indices Nifty 50 and Sensex have plummeted 27.8% and 28% respectively from February 28, 2020 to April 03, 2020. Rise in coronavirus cases in the country as well as at the global level and inability to find a vaccine to treat the epidemic has created panic all over the world.
As per the media reports, India has crossed the mark of 4,400 Covid19 cases. To curb the situation, the Government has announced a 21days lockdown due to which the economic activity and income of the people in the country are adversely affected. However, the Government has announced Rs.1.7lakh cr relief package to support the stressed pockets in the economy.
The investors are liquidating their market investments and ready to book losses in the fear that the market will fall further. However, investors from a long term point of view should act opposite, instead of selling their investments, they should accumulate the stocks with strong fundamentals and with attractive valuations.
Therefore, based on the positive outlook, future growth prospects, and management pedigree of the companies, we have selected the below 5 stocks that could be likely multi-baggers over the period of next 5-years.
We are positive on the stock on account of strong financial position, presence of strong promoter group and attractive valuations. The company has not seen any downsizing of temporary headcount by the clients due to spread of Covid 19. Not a single FTE (full-time equivalent) has so far been de-mobilised by clients. In general staffing, clients are retaining headcount in preparation for recovery, while IT staffing is benefitting from ramp-up at captives. The housekeeping business is steady. In staffing as well as FM, tri-partite agreements imply that Quess has on obligation to retain FTEs in the event of down-sizing by clients. However, the early closure of colleges will impact F&B revenues in the short run. We consider the recent correction in the stock to accumulate the stock for the long run. The stock is currently trading at 8.4x FY21EPS.
|Year||Net Sales (Rs Cr)||OPM (%)||PAT (Rs Cr)||EPS (Rs)||PE (x)|
Source: 5paisa Research
Tata Consumer Products
We are positive on the stock on account market share gains and new launches. Market share gains in India tea are mainly from regional and local players. The company commands 20% market share in tea segment in India. Moreover, it will also benefit owing to the shift from unorganized to organized sales on the back of premiumisation, strong marketing campaigns (Jaago Re) and higher sales of new variants (Elaichi, Masala, Agni). The increasing trend of Specialty, herbal teas in international market (US, UK, Canada) will also drive future growth. Thus, we expect revenue CAGR of 6.8% over FY19-21E. We expect EBITDA CAGR of 18.5% over FY19-21E due to to favorable commodity prices and improvement in margin of coffee business. We expect PAT CAGR of 15.9% over FY19-21E. The stock is currently trading at 30.7x FY21EPS.
|Year||Revenue (Rs cr)||OPM (%)||Net Profit (Rs cr)||EPS (Rs)||PE (x)|
source: 5paisa Research
Exide Industries, a duopoly player, stands to benefit from auto replacement demand recovery, emerging opportunities (solar and e-rickshaws), cost control & minimal capex, and softer lead prices. However, the company will face short term challenges due to the temporary shutdown of manufacturing units and slowdown in the economy due to spread of Covid19. Thus, we see revenue CAGR of 5% over FY19-21E. We expect margins to improve by 120 bps in the same period on lower lead prices and better after market OEM revenue mix. We forecast 9% PAT CAGR over FY19-21E driven by healthy top-line growth (stable replacement demand + recovery in OEM volumes). The stock is currently trading at 10.8x FY21EPS.
Source: 5paisa Research
SBI Life Insurance (SBI Life)
SBI Life is India’s largest private life insurer, with an overall market share of 12.2% on a retail APE basis. The company has a product mix of participating, non-participating and linked policies, with the mix skewed towards linked products. Unlike peers, for which growth is largely driven by one or two product segments, SBI Life has delivered industry leading growth across protection, non-par annuity and guaranteed return products as well as ULIPs, defying the weak sentiment in the capital markets. We believe that it could continue to surprise the street positively via resilient growth in uncertain times driven by a strong distribution franchise and mass customer base. We expect 17.3%/25% EV/VNB CAGR over FY19-21E. The stock trades at 2x FY21E P/EV.
|Year||New Premuim Income (Rs Cr)||VNB (Rs Cr)||VNB margin (%)||PAT (Rs Cr)||EV per share||P/EV (x)|
Source: 5paisa Research
Deepak Nitrite (DNL)
We expect strong topline growth of 29.2% CAGR over FY19-21E driven by growth in the Basic Chemicals and the Fine & Specialty segments. Downstream derivatives of phenol and acetone should start contributing to growth from FY21E. The company continues to invest in R&D, and efforts are underway to launch new fine & specialty chemicals that are agrochemical and pharma intermediates. Further, Management expects DNL to benefit from the unfortunate outbreak of the novel coronavirus, which will likely accelerate the search for non-China suppliers. EBITDA margins are expected to improve 450 bps over FY19-21E due to continuous strength in basic chemicals, Fine and Specialty chemical segment and products business. We see PAT CAGR of 70.2% over FY19-21E. The stock is trades at 10.3x FY21E EPS.
|Year||Net Sales (Rs Cr)||OPM (%)||PAT(Rs Cr)||EPS(Rs)||PE(x)|
Source: 5paisa Research