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Best SIP to choose from in 2018

Best SIP to choose from in 2018
08/06/2018

With the mutual funds market becoming the favored avenue of investment, more and more investors are opting for Systematic Investment Plans (SIP). SIPs allow investors to invest a pre-specified amount on a regular basis in their choice of mutual funds. Investing in mutual funds is a prudent action for building your wealth over the long-term or for achieving your short-term financial goals.

Why choose SIP?

SIP is beneficial for investors who cannot invest in lump sum amounts and also for first-time investors who have just started their financial journey. An SIP allows investors to avail the benefits of rupee cost averaging, where the investor gains more units when the market is down and vice versa when the market is up. SIP also instills investing discipline and a savings habit.

The Securities and Exchange Board of India (Sebi) had, in October 2017, re-classified mutual funds, as a result of which, many funds were re-categorized, merged/demerged, and their attributes changed. Mutual fund houses also altered their portfolios after the Sebi circular.

If you want to invest in the financial markets through the mutual funds route and are wondering which SIP to choose from among the many available, here are some of the best SIPs to choose from in 2018.

Large-cap funds

As per the Sebi circular, large-cap companies are those that fall in the ranks of 1-100 in terms of full market capitalization. Thus, the best large-cap funds to invest in 2018 would be:

  • Mirae Asset India Equity Fund

    The objective of this fund is to gain maximum appreciation on long-term capital by investing in opportunities from the Indian economic growth story. The fund shifts its investments between equity and equity-related securities.

    The annual returns of this fund for the past two years has been at 20% and it has received a CRISIL rank of 2. Thus, this is one of the best large-cap SIP funds to invest in 2018.

  • UTI Equity Fund
    This fund also aims at maximum long-term capital appreciation and invests in equity and equity-related instruments of various large-cap companies.
    The fund has given 17% annual returns in these past five years and has a CRISIL rank of 3. This is also one of the best large-cap SIP funds to invest in 2018.

Mid-cap funds

Bordering between small-cap and large-cap, mid-cap companies are those that rank between 101-250 in terms of market capitalization, as per the Sebi circular. Based on this classification, the best mid-cap funds in 2018 are:

  • Aditya Birla Sun Life Pure Value Fund

    The fund’s objective is consistent capital appreciation by investing in stocks that are trading at a valuation lesser than their intrinsic value, namely undervalued stocks. It invests primarily in equity and equity-related instruments.
    The fund has given 29% annualized returns in the past five years and has performed well in the mid-cap segment. CRISIL has given it a ranking of 2.

  • Canara Robeco Emerging Equities Fund
    This fund’s objective is to generate capital appreciation by investing in a diversified portfolio of large and mid-cap stocks. The fund has given 30% annualized returns in the past five years and has also out-performed other mid-cap funds.
    It is ranked at number 3 by CRISIL and in one of the best SIPs in the mid-cap segment.

Small-cap funds

The smallest companies in terms of market capitalization, i.e. from rank 250 onwards as per the Sebi classification, are known as small-caps. The best small-cap funds to invest in 2018 are:

  • Reliance Small Cap Fund

    The fund’s objective is to generate long-term capital appreciation by investing in equity and equity-related instruments of small-cap companies.
    The fund has given 35% annualized returns in the past five years and has performed well in the mid-cap segment. CRISIL has given it a rank of 1.

  • SBI Small Cap Fund
    The fund’s objective is to provide investors with long-term capital growth opportunities with the liquidity of an open-ended scheme by investing primarily in a well-diversified portfolio of equity stocks of small-cap companies.
    The fund has given 35% annualized returns in the past five years.

There are many mutual funds available in the market that have given consistent, profitable returns over the years. However, before investing in a particular fund, conduct due diligence and seek professional advice to choose the fund that fits your risk appetite and leads you to your financial goals.

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Advanced Investments To Get Rich Quick

Advanced Investments To Get Rich Quick
13/06/2018

All of us want to become financially secure. We look for ways that aren’t very risky but promise high returns. These four options could help you increase your potential of earning profits.

Currency derivatives

These are F&O contracts where the buyers and sellers exchange one currency for another at a particular price in the future. It is an excellent hedging opportunity for importers and exporters alike. Even a slight change in the currency rates can lead to enormous profits. Another advantage of currency derivatives is that it gives lucrative arbitrage opportunities. Arbitrage opportunities allow the trader to simultaneously buy and sell the currency inter-market to gain profits from small price differences.

Mutual funds

Investing in mutual funds is one of the best modes of securing your finances and range from debt-based funds to equity-based funds as well as mixed products. They have easy as well as complex structures, suited for all investors. They also provide you an opportunity to invest into the funds of your own choice at different price points. Mutual fund managers make tailor-made portfolios for clients, which helps the latter make more profits in less time, eventually, making them rich.

Intraday trading

Intraday trading is another way to increase one’s wealth in a short period of time. As the name suggests, it is the process of buying and selling stocks on the same day, or within a day’s time (i.e. without getting delivery of shares) during the trading hours (9:30 AM to 3:30 PM in India). Intraday trading provides enormous profits if the right stocks are chosen. It is successful only if proper research is done. Also, it is essential to follow the market trend to decide which stocks to buy. One must trade in liquid markets rather than volatile markets. Let’s assume that after proper research, you buy 100 shares at the start of the day at Rs1,000/share. At the end of the day, its price increases to Rs1,100. It will benefit the trader with Rs10,000. A combination of the above strategy will incur profits and make the trader richer.

Futures and Options

Futures trading is the contract to buy or sell an underlying asset on a specific date in the future at a predetermined price. The buyer and seller of the contracts are obligated to relinquish them at the decided future date. In the future, there will, most likely, be a change in the price of the asset. If the market price of the asset increases, the buyer earns a profit. On the other hand, if it decreases, the seller benefits.

Contrary to this, options trading does not force the buyer or seller to sell the asset at the predetermined date. However, it gives them a right to trade. Options trading requires the buyer to pay a premium. If the contract gets canceled, the buyer will only lose the premium. Whereas, a thriving trade will either make the buyer or the seller rich.

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5 Must-Have Services From Your Broker

5 Must-Have Services From Your Broker
18/06/2018

In the world of trading, things would have become highly complicated without brokers. It is thanks to brokers that the financial markets run efficiently. As the middle-man, a broker is the enabler for every trade that you want to make. Hence, a broker is quite important to every investor.

Who are stock brokers?

Stock brokers are the registered and licensed representatives of an exchange in the stock market. They help traders by putting forth their request in the share markets and also help settle the transactions. Besides investing in stocks, they can also assist in purchasing and selling financial assets at in exchange for a fee, called brokerage. The brokerage varies amongst different brokers based on the terms of the services availed.

Basic services to seek from a broker

Brokers offer you a number of services. If you wish to build wealth through the financial markets, do ensure that your broker provides these 5 basic services.

  1. Tips

    Your broker is responsible for providing you with regular share trading tips and to answer all your questions on subjects such as trading accounts, portfolio securities, and online trading.

  2. Guidance

    Besides offering guidance on how to buy shares online, he should also recommend the best online trading sites to enable you to learn and grow.

  3. Financial planning

    Your broker should be well-equipped to help you attain your investment objectives once you provide them with the necessary information about your financial goals. They should also offer you the option of tax-saving investments along with short-term investment options which will help you accomplish your financial goals.

  4. Timely action

    A broker should be able to carry out your trading decisions at the earliest. Not executing orders in time may decrease profitability or in worst cases, increase losses.

  5. Client support

Due to technical and human errors, you may often run into tiny problems despite no fault of your own. Choose a broker that provides client support and solves all such problems in a hassle-free manner at the earliest.

Personal brokers take care of all your investment needs. They also expose you to platforms that carry out fundamental research and also provide you with tools for technical analysis. Today, most people look for online stock brokers who can share market basics with them in the course of trading. 5Paisa.com is one such broker, which also charges a flat brokerage no matter the size of the transaction, who will assist you with your trading requirements while helping you learn and grow into an intelligent investor.

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Rites Ltd-IPO Note

Rites Ltd-IPO Note
IPO
by Nikita Bhoota 19/06/2018

Issue Opens: June 20, 2018
Issue Closes: June 22, 2018
Face Value: Rs 10
Price Band:  Rs 180-185
Issue Size: ~ Rs 466 cr
Public Issue: 2.52 cr shares (at upper price band)
Bid Lot: 80 Equity shares   
Issue Type: 100% Book Building

Shareholding (%)

Pre IPO

Post IPO

Promoter

100.0

87.4

Public

0.0

12.6

Source: RHP

Company Background

RITES is a leading player in the transport consultancy and engineering sector in India. It provides consultancy (67% of 9MFY18 sales) in urban transport, roads and highways, ports, inland waterways, airports, power procurement, etc. It is also engaged in leasing (7.5% of 9MFY18 sales) and exports (16.9% of 9MFY18 sales) of locomotives and rolling stock. Further, RITES undertakes turnkey projects (6.9% of 9MFY18 sales) on engineering, procurement and construction basis for railway lines, railway electrification, etc. The Ministry of Railways (MoR) and RITES have a 49:51 joint venture - Railway Energy Management Company (REMC) for power procurement including renewable energy for railways. Power generation contributes 1.7% to 9MFY18 sales.

Objective of the Offer

The offer consists of offer for sale of up to 2.52cr shares (Rs466.2cr) by the government of India (GOI). It includes employee reservation of 12 lakh shares. There is a discount of Rs6 per share (at the cut-off price) to the retail investors and employees. The net offer consists of ~2.4cr shares. The object of the offer is to carry out disinvestment plan of GOI.

Financials

Consolidated (Rs cr)

FY15

FY16

FY17

**9MFY18

Revenue from operations

1,013

1,091

1,353

936

EBITDA Margin %

34.3

32.7

26.5

32

Adj. PAT

312

281

353

243

EPS (`)*

15.6

14.1

17.6

12.1

Growth y-o-y (%)

19.7

-9.8

25.4

-

P/E*

11.9

13.1

10.5

-

P/BV*

2.2

2

1.8

-

RoE (%)

18.6

15.1

17.3

-

Source: RHP, 5Paisa Research; *EPS & Ratios at higher end of the price band and on post IPO shares, **non-annualized numbers

Key Investment Rationale

  1. RITES is expediting efforts to scale up its EPC/turnkey business mainly from MoR. The company has been awarded projects for railway lines and railway electrification. The current order book for this division stands at Rs1,408cr. Although, this business could be margin dilutive given EBITDA margin is as low as ~8%. Nevertheless, the company believes that given huge investments in electrification and railways, the increasing traction will help the company strengthen its business by increasing its EBITDA and net profits in absolute terms.

     

  2. Orders from MoR, central/state governments and Public Sector Unit (PSUs) form ~77% of the company’s total order book. Incorporated by MoR, RITES has a long association with the Indian Railways, which is the fourth longest rail network in the world. RITES is a nominated organization for the export of railway locomotives, coaches and other equipments manufactured by the Indian Railways (other than exports to Malaysia, Indonesia and Thailand). Thus, we expect RITES to be a prime beneficiary of the government infrastructure spend particularly railways.

     

  3. The company’s order book at FY18 end stood at Rs4,819cr including 353 ongoing projects. The order book provides strong revenue visibility of about 3.5 years. The order pipeline looks promising as there are opportunities in the infrastructure sector in India as well as in other countries such as Sri Lanka, Bangladesh and Nepal.

Key Risk

The company faces competition from US, France and Germany based companies particularly in metro and turnkey projects. Despite the company being a preferred player by Indian Railways, it has to bid for many projects (as opposed to nomination basis).

Conclusion

At the upper price band, the stock is valued at undemanding P/E of 10.5xFY17 and 11.4x9MFY18 (annualized EPS). Further, IPO is more attractive for retail investors given the discount of Rs6 per share. We recommend Subscribe for long term.

Research Disclaimer
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Fine Organics Industries Ltd - IPO Note (Not Rated)

Fine Organics Industries Ltd - IPO Note (Not Rated)
by Nikita Bhoota 20/06/2018

Issue Opens: June 20, 2018
Issue Closes: June 22, 2018
Face Value: Rs 5
Price Band:  Rs 780-783
Issue Size: ~Rs 598-600 cr
Public Issue: 76.6 lakh shares
Bid Lot: 19 Equity shares       
Issue Type: 100% Book Building

Shareholding (%)

Pre IPO

Post IPO

Promoter

100.0

75.0

Public

0.0

25.0

Source: RHP

Company Background

Fine Organics Industries Limited (FOIL) is a Mumbai based specialty chemical (oleochemical) company. FOIL produces wide range of specialty additives used in food, plastic and other industries. It had 387 products sold under the 'Fine Organics' brand in FY18. Its customers include FMCG companies like HUL, Parle Products, etc. FOIL currently has three facilities with capacity of 64.3k tonnes/year. It is planning to add 52k tonnes/year capacity over next two years taking total capacity to 116.3k tonnes by FY20E end. Company in 9MFY18 derived 44% revenue from India and rest 56% from exports markets.

Objective of the Offer

The object of the offer is to achieve benefits of listing and sale of up to 76.6 lakh shares (Rs600cr on upper end) offered by the promoter group shareholders. This is a 100% offer for sale issue.

Financials

Consolidated Rs cr.

FY15

FY16

FY17

9MFY18**

Revenue from operations

636

686

815

590

EBITDA Margin (%)

18.3

22.3

18.7

17.9

Adj. PAT

53.2

76.5

78.4

60.9

EPS (`)

17.3

24.9

25.6

19.9

P/E*

45.1

31.4

30.6

-

P/BV*

11.6

9.6

7.3

-

RoE (%)

25.7

30.5

23.8

-

Source: RHP, 5Paisa Research; *Ratios at higher end of the price band, **non-annualized numbers

Key Points

  1. FOIL is the largest manufacturer of oleochemical-based additives in India and one of the few large manufacturers in global oleochemicalbased food/plastic additives. FOIL was the first company to introduce slip additives to the Indian market and it now manufactures wide range of oleochemical-based additives. FOIL is a very competitive company in its sector, which has helped it in pricing its products attractively. This has discouraged major domestic/global players setting up a manufacturing facility in India.
  2. FOIL currently operates three production facilities, one each in Ambernath/Badlapur/Dombivli with combined installed capacity ~64,300 tonnes/annum. FOIL, in Q4FY19E will be commissioning production facility in Ambernath (32,000 tonnes/year). In Q3FY20E, FOIL will commission its JV facility in Germany (10,000 tonnes/year). Premia Research Fine Organic Industries Ltd Company is expecting to commission a 10,000 tonnes/year bakery/confectionary products ingredient manufacturing facility in Patalganga (JV with Fine Zeelandia) in Q1FY19E. Once these capacities are commissioned, the current capacity of 64.3k tonnes/year will grow to 1.16lakh tonnes/year in FY20E.

Key Risk

The company is nearly doubling its capacity over next two years and is also entering in oleochemical manufacturing in Germany. Company also claims that oleochemical is dominated by very few large companies and hence we believe that additional capacity additions may drive down the oleochemical realizations

Research Disclaimer

Next Article

5 Tips for Successful Long-Term Investors

5 Tips for Successful Long-Term Investors
21/06/2018

We all want to make big money, and we all want to make it fast. However, what most of us don’t realize is that patience is the key to better returns on all investments.

Why long-term investments are good

There are many ways to multiply your wealth. Based on your goals, you can choose between short-term and long-term investments. Short-term investments are anywhere between three-nine years, while long-term are those that last more than 10-15 years.

People invest in the stock markets because it yields a better return on investments. A ten-year fixed deposit of Rs5,000 with a 7.5% rate of interest will not give the same returns as compared to investments in the market. If you invest the same amount in stocks today, you could be able to draw much more after 10 years.

However, long-term investments demand a lot of patience, discipline, and moreover, an ample amount of research and understanding of the market.

While there is no perfect hack to the market, here are a few tips for you to become a successful long-term investor:

Be aware of what you're getting into

Read newspapers, books, articles on current trends in the markets. Don’t get into a stock only on the basis of the company’s popularity or hearsay, i.e. without checking for yourself how the business or the stock is performing. Learn to grow your money based on knowledge and sound understanding.

Invest in a business you understand

Expert investors often advise: ‘Do not invest in stocks. Invest in a business.’ Keeping this in mind, make sure you know the business and the industry before you invest in a company. This way, you can easily sense if the business’s prospects go from good to bad and move out in time.

Don't panic if the market falls

In falling markets, we tend to make decisions out of fear as our money on the line. However, this isn’t the best choice. Markets rise and fall all the time. If you've done your research well, you’re targeting long-term growth. Hence, you need not dread any short-term fluctuations.

Avoid the herd mentality

It is the most common mistake rookie investors make. A typical buyer tends to make decisions because his neighbor, acquaintance, or relatives said so. This may backfire in the long-term. If you do not want to lose your hard-earned money, avoid the herd mentality. Stocks don’t perform just because ‘people say so’.

Select companies that give out regular dividends

Although the primary reason to invest in a company is profit from the rise in valuation, dividends can be a great source of income too. If the company is doing well, you will receive a certain amount of profit as regular dividend. This will also be a constant source of revenue throughout the holding period, which is far better than stocks, which don’t give dividends and only give profit on selling.

Here's a bonus tip: Have a strong partner

Investing in stocks requires you to monitor the rise and fall of your shares continuously. You need a mentor or advisor that will guide you in making the right decision.

This may be a broker or a trusted friend. 5paisa.com is the right place to find your ideal financial advisor. We will help you with every step of the way to enhance your financial portfolio and make sure you get the returns you deserve.