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JSW Steel to Levy Surcharge on OEM Customers

JSW Steel to Levy Surcharge on OEM Customers
by 5paisa Research Team 25/10/2021

Indian steel companies are reeling under the onslaught of rising manufacturing costs. JSW Steel being one of the largest integrated steel producers in India, is no exception. Now JSW Steel has come up with an innovative idea of levying a surcharge on steel products sold. To begin with, this surcharge will only be levied on long term OEM customers.

The OEM customers or Original Equipment Manufacturers are the large institutional buyers of steel having long term contracts with JSW Steel. These include sectors like construction, automobiles etc. Since prices are decided in advance, this surcharge is a temporary method to offset some of the input cost spikes in recent times.

Some of the key inputs that go into manufacture of steel like ore and coking coal have gone up sharply. For example, coking coal accounts for 40% of the cost of steel production and India largely relies on imports for coking coal. However, the price of coking coal has rallied from $120/tonne to $400/tonne in the last one month.

Read: Steel in Demand

The net result is that the steel manufacturers have seen a spike of Rs.6,600 per tonne between July and September this year. In percentage terms, this translates into a cost spike of 19%. There is no way such cost spikes can be either absorbed or passed on to incremental buyers. That is why JSW is planning to levy surcharge on OEM customers.

Speaking on the subject, JSW Steel CFO Seshagiri Rao pointed out that the concept of surcharge may be novel in India but it is common across UK and Europe. Steel companies pass on higher cost in different forms like energy surcharge, transport surcharge etc. The bottom line is that even Indian steel companies have to rework prices in the current context.

Steel companies broadly cater to the retail market, export market and the OEM market. In the retail market, the prices fluctuate on a daily basis and surcharge would not be required. The export market is driven by global competitiveness.

The only market that is left is the OEM market where surcharge makes sense due to the long term nature of contracts. Steel is one more case of industries being squeezed by a spike in the cost of minerals, coal, coking coal etc. They really have no choice but to pass on the cost hikes.

Also Read:- 

Is the pressure on metal stocks likely to continue?

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Best Mutual Funds For SIP In 2021

Best Mutual Funds For SIP In 2021
by 5paisa Research Team 25/10/2021

In recent times, people have moved beyond fixed deposits and insurance policies to look for better ways to invest and grow their money. While old savings schemes offer secure and stable ways to keep money, they often do not provide high growth or interest rates to satisfy all. Mutual funds are an excellent way to grow your money in a short period of time.

If you are someone who is recently discovering mutual funds and SIPs, you must read a lot to understand which funds are the best currently. While some investors risk their money by their gut feeling, some prefer to do extensive research before starting their investment journey.

For the unversed, mutual funds are professional investment funds that pool money from several investors and purchase securities. This system is managed by experts and they try to minimize risks and maximize profits for everyone who has put money in.

However, you must know how to invest in the best mutual funds for SIP so that you get maximum returns in the time period of your preference.


What is SIP (Systematic Investment Plan) ?

A Systematic Investment Plan or SIP is a facility by mutual funds in which investors can put money in an organized manner. In an SIP, you can invest a fixed amount of money at regular intervals in your selected mutual fund scheme. The investment interval can be predecided before making the SIP.


Best Mutual Funds for SIP in 2021

Since there are so many investment funds and options in the market, beginners often get confused about which mutual funds to invest in, and specifically which mutual fund is best for SIP. This is why we bring a list of the best mutual funds for SIP that you can trust in 2021.


BOI AXA Mid & Small Cap Equity & Debt Fund

This is a hybrid SIP that has seen 78.26% three-year returns and 15.62% in one-year returns. BOI AXA Mid & Small Cap Equity & Debt Fund has an 80.91% investment in Indian stocks presently. Of that, the fund has 13.67% investment in debt, where 1.97% is in government securities and 11.7% has funds invested in securities with very low risk.

This aggressive mutual fund scheme has no lock-in period and has an expense ratio of 1.9%, which is higher than most other aggressive hybrid funds. It last doubled investment in one year and three months, which means it is a great SIP to invest in.


ICICI Prudential Bluechip Fund

ICICI Prudential Bluechip Fund is one of the most stable and consistent performers when it comes to mutual fund SIPs. It is a large-cap fund that has given around 32% returns in 2017 and 9% returns in 2019. 

If you do not see immediate growth with this investment, do not fear. This bluechip fund is aimed at long-term growth in equity schemes. Keep investing and see your finances improve steadily.


PGIM India Flexi Cap Fund

This flexi cap fund has seen three-year returns of 68.98% and a one-year return of 23.47%. It aims to reduce the volatility of market conditions and adapt itself to provide maximum security to its investors. Basically, PGIM India Flexi Cap Fund SIP dynamically allocates portfolios across market caps to generate risk-adjusted returns.

It is ideal for investors who want to keep their money invested for at least three to four years without worrying too much about minor losses. At the end of this period, you will get high returns. This fund has 92.67% in Indian stocks, of which 46.02% is in large-cap stocks.


Axis Bluechip Fund

Axis Bluechip Fund is another long term capital investment SIP with a good track record of returns. It has seen 51.1% returns in the last three years and 22.6% in one year. It archives long term appreciation by investing in a diversified portfolio that consists mostly of equity and equity-related securities.

This large-cap fund provides growth that can beat inflation in a few years and is extremely suitable for people looking to invest for more than five years, ideally between 10 to 15 years. The longer you invest, the higher returns you can expect from this fund. Although Axis Bluechip has moderately high risks, it has a great long term return record. 


Parag Parikh Flexi Cap Fund

This flexi cap fund is a direct-growth mutual fund scheme from PPFAS Mutual Fund. It was initiated in 2013 and has since served steady returns to its investors. Currently, Parag Parikh Flexi Cap Fund has over 14,590 crore rupees worth of assets and is a small fund. Its expense ratio is 0.87% and its last one-year returns rate is 59%. 

This fund is known for delivering consistent results and doubling the invested money in less than two years. It also has the ability to control losses above averagely during bad phases in the market. Most of its funds are invested in technology, finance, automobiles, and FMCG sectors.

If you invest in this SIP, you can expect returns without major ups and downs and also choose to withdraw your money in lesser time as compared to other SIPs.

Check - Top Performing Equity Mutual Funds


Mutual fund SIPs are a great way to start your investment journey and get some constructive knowledge about the market. Before taking big judgement calls and higher risks, it is advisable that you invest in these reliable mutual funds for SIP to ensure higher returns and lower risk factors over time.

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NAV In Mutual Funds - Things You Should Know

NAV In Mutual Funds - Things You Should Know
by 5paisa Research Team 25/10/2021

To have a clear idea about NAV, you should first know about Mutual Funds. A mutual fund is a professionally managed investment company, which pools money from many individual investors and invests them according to a particular investment objective stated in its prospectus.

The MF Industry's AUM has grown significantly from ₹ 15.63 trillion since August 31, 2016, to ₹36.59 trillion on August 31, 2021, which is a double-fold increase in a span of 5 years.

If you check the performance of a mutual fund online, you will come across its Net Asset Value (NAV). But what exactly do you need to know about NAV? Let's look closely at the details!

What is NAV?

Source: NAV

The NAV or Net Asset Value is the price per share that would bring the assets of the fund up to par with its liabilities.

As per SEBI regulations, NAV can have two components - Market Price and Value of Assets. The market price changes every second based on demand and supply, but the value of assets remains constant till it gets sold off completely (if ever). Hence this difference is called net, which means net value.

The measure is an indicative value based on the value of all the securities that constitute that particular scheme. The calculation is done once every day at the end of market hours, and it reflects the exact value of all the securities held. This value is arrived at after considering all transactions and price movements since the previous NAV was calculated.

Note: If there is a dividend distribution, the previous NAV may change to affect valuations.

NAV Calculation

NAV is derived by dividing the total value of all the investments in a fund's portfolio by the number of outstanding units (shares). The NAV in mutual funds determines the purity of your investment.

NAV can be calculated using either "mark-to-market" (MTM) or "mark-to-model" (MTM). While MTM uses actual market prices, MTM uses information from past performances of the portfolio.


Source: NAV in Mutual Funds

These fluctuations can occur because a mutual fund incurs operating costs or administrative fees throughout a trading day. For example, if a mutual fund incurs a 1% management fee each year, its net assets will decrease by 1% each day regardless of whether its prices have gone up or down.

How is NAV essential for investment in Mutual funds?

Mutual funds are one of the most popular investment options available in India currently. This is because mutual funds offer several benefits over other investment options such as direct stock investing. Still, they are usually not associated with too much volatility like direct stock investing can sometimes be.

For this reason, many investors choose to invest in mutual funds instead of directly choosing to invest in stocks (or other types of securities). However, many people make it their top priority to know about the performance of their mutual fund investments instead of learning more about the NAVs of their respective investments.

Source: NAV in Mutual Funds

To understand how this works, consider an example where you have X, and Y. Fund X has a NAV of Rs. 100 while Fund Y has a NAV of Rs. 110. Now assume that both these funds have the same benchmark indices and the market value of both these funds is Rs. 1,000. In such a case, Fund X will be trading at a discount, and Fund Y will be said to be trading at a premium.

The NAV in mutual funds is calculated after accounting for all inflows and outflows. The value will be lower if there are more inflows than outflows and vice versa.

Difference between NAV and AUM

AUM stands for Assets Under Management. It is the total market value of assets invested by investors, whether directly or through mutual funds. Depending on the situation, the NAV might be different from the AUM.

The NAV can be higher or lower than the AUM, depending on whether investors buy or sell shares in the fund. If investors are buying shares, then the NAV rises while the AUM remains unchanged. This means that mutual funds can have a high NAV even if they don't have many investors. On other occasions, when investors sell shares, the NAV will fall while the AUM remains unchanged because new shares are being created to accommodate new investments coming into the fund.

Factors affecting NAV

The NAV of your mutual fund will be affected by the following factors. Let us understand each of these in detail:

1. Net Purchases/Redemptions

This refers to the net change in the number of units held by investors. When a mutual fund has more inflows than outflows, its NAV increases. When there are more outflows than inflows, its NAV decreases. This is a common phenomenon and occurs due to several factors, such as:

i) Investors becoming aware of a particular mutual fund scheme and investing in it.

ii) The performance of the scheme being good, which attracts more investors into that scheme.

iii) A particular investor having a large amount of money to invest, which they want to invest in that particular scheme only.

iv) Some investors redeeming their units for some reason (e.g. due to an emergency).

2. Dividends Distribution

The NAV of your mutual fund will be reduced if it declares a dividend. In such a case, an investor will have to pay more money to buy the same units from you.

The dividend declared is usually announced in advance and can affect the fund's price on the days leading up to the declaration date.

3. Capital gains:

When a fund manager sells a stock or a bond that has gone up in value, he generates capital gains for himself and his investors. This leaves them with fewer stocks of this particular company, so they have to sell some other stocks to buy back the shares sold earlier.

They can't do it unless someone is willing to sell them those shares at that moment; therefore, when they are buying back shares from investors, they're also selling an equal number of new shares to someone who is buying into that fund for the first time (in simple terms: when you buy back old shares, new money comes in).

So, if you invest in a fund before it declares its capital gains, you will get paid for your old investments by the new investments coming in after trading resumes.

4. Inflow of Funds

The NAV can also be impacted when new money comes into a mutual fund. This can happen when an existing investor decides to add more money into their existing investment or when a new investor comes in and places fresh cash into their account. In both cases, additional money will flow into your mutual fund, and its NAV will increase accordingly.

Wrapping Up

NAV is not static and does change over time. It changes every day since new assets are added while some assets are sold off, and some liabilities are paid off. Know your basics before you begin investing!

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Guidance on How Mutual Funds Work

Guidance on How Mutual Funds Work
by 5paisa Research Team 25/10/2021

Mutual funds have been around for a long time now, but pop culture has brought them back into the limelight only recently. Fact is, in the year 2020, according to Statista, India had a mutual fund investment of about ₹12 trillion!

People have started to finally realize the true value of these long-term investments. Mutual funds come with many benefits and, like any coin, has two sides, certain risks as well. Let's take a quick look into how mutual funds work to understand their value and prospects for your future security.


What are Mutual Funds?

A mutual fund is made up of two words - "mutual" and "fund" - very aptly. It is basically a packet of funds collected from various willing investors, a kind of financial vehicle, which is further invested in securities in the market. A money manager (a professional in investment) is in charge of this packet of funds, and he rotates these funds in the market with a view to gain some profits from it for the investors.

How your mutual fund goes around depends on the rules and conditions you define for it in the prospectus that stays updated with your money manager. Mutual funds give small investors a chance to be a (proportionate) part of a larger fund portfolio which is professionally handled by money managers. Since there are a variety of securities in which this fund is invested, the gains from each mutual fund are determined based on its category (whether small-cap, medium-cap, large-cap, Flexi-cap, etc.).


Mutual Funds' Concept Explained

Mutual funds can be thought of as a mechanism to pool funds from different investors (like you or your friend) and invest this collection into securities, such as stocks and bonds. Since this money is invested in the market, it is subject to respective ups and downs that the daily Sensex brings. You can track the performance of your portion in the mutual fund by tracking the performance of the stock/bond/share/etc. that it was invested in.

The point to note is that there is an innate difference between investing in a mutual fund and investing directly in shares or stocks. When you put your money on a mutual fund, you get access to a portion of the performance that it marks in the market - this could potentially come from ten different securities owned by different entities.

On the other hand, investing directly in a share keeps you invested in the company it belongs to and may give you voting rights depending on the quantum. Buying mutual funds doesn't get you voting rights, because it consists of various market securities.

On the same note, while shares and stock prices are direct indicators of their value, the same doesn't apply to mutual funds - because it is comprised of many different stocks and shares of different values. Instead, the Net Asset Value is used to indicate how well or poorly a mutual fund is doing in the market.

The NAV of a mutual fund can be determined by dividing the total number of securities in that portfolio by the total number of outstanding shares. The interesting thing is, unlike the volatile nature of market shares, the NAV of mutual funds doesn't update every hour. It is updated every day at the end of the trading day.

Let's now understand how mutual funds work.


How do Mutual Funds Work?

Think of mutual funds as a company that deals with investments. When you buy a share in this mutual funds company, you gain a portion of its profits that are proportional to your investment in the company. Now, there are three major ways that you can access these profits, based on your requirement or preferences:

a) By way of income. You can define your prospectus to generate regular income for you from the dividends that your share in a mutual fund is earning. Either this, or you can have it reinvested in the market for more shares.

b) By way of capital gains. A mutual fund encashes capital gains when it sells securities that have increased in price. These gains are then passed to the investors by way of distribution.

c) By way of selling your mutual funds share. If the mutual fund that you invested in has increased in price but the fund's manager hasn't sold them yet, you can sell your portion of the fund to cash in on some profit.

Mutual funds, since they can be treated as long-term investments, tend to absorb the ups and downs of the market. This is why people today prefer these financial vehicles as a mode of dynamic savings that grow steadily over time.



Mutual funds aren't difficult to understand. A majority of their handling is done by funds managers, so if you do plan to invest in a mutual fund, you barely need to do anything yourself except for determining the terms for investing your money.

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Everything You Need to Know About Redeeming Mutual Funds

Everything You Need to Know About Redeeming Mutual Funds
by 5paisa Research Team 25/10/2021

There is always a lot of noise and deliberation in the air about where to invest or when to invest your money in the markets or mutual funds. What is less spoken about is when to make a smart exit from your investment to optimise your returns. Now you might be thinking: 'Not me. I don't have the time to actively track and redeem my investments! It's long-term.' 


Why bother to plan your redemptions?

Well, the truth is that in this time and age, a 100% passive approach towards investment by taking out your money only when you need to cater to your financial goals or obligations is bound to hurt you at some point. Having a strategy about your mutual fund redemption time would not only make it faster to reach your goals and garner more profits but can also help you save a lot of money in undesirable exit loads and taxes.

Two broad questions arise when it comes to redeeming your units:

When to redeem? And How to redeem? Let's understand both aspects.

When should you redeem your mutual fund units?

While a lot of other factors can impel you to sell your units and withdraw the sum invested, including personal emergencies, these are the rational triggers for you to take a call on redemption:

Consistent drop in returns/negative returns

No, that doesn't mean you jump ship based on a week or month's evaluation. The decision must be taken after comparing the category average returns of similar funds during the same period. Comparison with the benchmark stock index performance can also give you some insight if your fund is really doing poorly.

Your Objective Vs Fund's Objective

Your initial investment decision was most likely based on the objective stated by the fund. As you move towards retirement or some other horizon, your risk appetite might change. It's important to then shift to a fund with an objective that realigns with your new investor profile.

Profit Booking

Timing the market is a tricky thing. But at times, economic indicators can make it obvious for you to exit a particular sector, book your profits and divert the funds elsewhere.

For example, an increasing/declining trend in the value of INR or USD may indicate that the IT sector revenues are going to go down, and so is the tech industry. You can realise the accumulated appreciation in your Sectoral/Thematic Tech Mutual Fund units and invest the amount in, say, Pharma Funds.

To rebalance your portfolio

Allocating your total investment amount among multiple asset classes like Debt, Equity or Hybrid Funds in a fixed ratio helps you get diversification benefits. Whenever this ratio changes due to market movements, you can redeem units from one asset class and purchase units in another to rebalance your portfolio back to the same ratio, at fixed intervals. This will ensure the highest returns as per your risk tolerance levels.

Minimise/avoid exit loads

To reduce withdrawals and lock in a minimum investment window for investors, the Asset Management Companies charge an Exit Load as a percentage of the NAV. This charge is waived off when the units are redeemed beyond a certain period of time, say 3 months or 1 year. Hence your mutual fund redemption time largely affects your overall returns.


Tax optimisation 

Equity Oriented Mutual Funds are taxed in the long term (when redeemed after 1 year) at a 10% rate over and above Rs. 1 Lakhs gains and a flat 15% rate if redeemed earlier. The rates are different for Debt Mutual Funds with long term (when redeemed beyond 3 years) taxes being 20% and short term capital gains tax as per your individual income tax slab. 

So you need to be tactful about when to redeem your units to avoid paying hefty taxes.

Now that you understand why timing is so crucial, let's walk you through the different ways in which you can make your exit.

How to redeem your units?

Lumpsum redemption

This is redeeming your units in one go, just like withdrawing all or part of your money in a single chunk. While this is the simplest way to do it, you should make a plan ahead of your redemption as to where you will park this money after withdrawal, if not be used shortly. 

Systematic Withdrawal Plan

Instead of redeeming all your units at once, you can opt for an SWP and give instructions to your fund house to redeem a fixed number of units at fixed intervals for a stretch of time. You can choose this method if you wish to receive a steady flow of income and also want to minimise your capital gain tax burdens by spreading it over several financial years.

Systematic Transfer Plan

This works similar to SWPs, only here, instead of periodically withdrawing your units, instructions are given to redeem the units of one scheme and transfer them to another scheme of the same AMC. This way, you can gradually shift the weight of your portfolio towards less risky schemes to protect your capital, as you approach your financial goal.

Like investment, redemption too should be done by exercising caution and some amount of discipline. Whimsically liquidating your funds or switching from one scheme to another without considering the tax angle can erode your returns significantly. Remember to keep the above considerations in mind, and you're good to go!

Also Read About :- 5 Easy Steps to Exit & Redeem Mutual Fund

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India to launch Third Tranche of Bharat Bond ETFs

India to launch Third Tranche of Bharat Bond ETFs
by 5paisa Research Team 26/10/2021

After 2 successful rounds of PSUs raising debt through Bharat Bond ETFs, the government is all set for the third tranche. This tranche is expected to hit the market around December this year and it will once again target to raise over Rs.10,000 crore through the Bharat Bond ETF issue. The Bharat Bond ETF third tranche will be managed by Edelweiss AMC.

Bharat Bond ETF is an exchanged traded fund which will invest purely in PSU debt. To maintain quality of the ETF, the investments are currently being made only in “AAA” rated bonds. Currently, the government is working out the funding requirements of the PSUs and based on that the final amount to be raised via the third tranche will be determined.

The Bharat Bond ETF has been a win-win for both sides. The investors get access to a portfolio of high quality PSU debt paper with diversified risk profile. The PSUs, on the other hand, get a centralized fund raising platform with a unique value proposition. It smoothens out the fund raising and capex for PSUs without going back to the debt markets again.

Due to these advantages that investors see in these bonds, the Bharat Bond ETF tranches 1 and 2 were extremely successful. The first tranche of Bharat Bond ETF was made in Dec-19 and that collected Rs.12,400 crore. The second tranche of Bharat Bond ETF was made in Jul-20 and that raised Rs.11,000 crore. With the markets flush with liquidity, the government is expecting a bigger response to the third tranche of ETFs.

The maturity options in the Bharat Bond ETFs vary from tranche to tranche. The first tranche in Dec-19 offered maturity time frames of 3 years and 10 years. However, the second tranche in Jul-20 offered maturity time frames of 5 years and 12 years. It remains to be seen what maturities the Tranche 3 of Bharat Bond ETFs offers to investors.

The smart response to the first two tranches of the Bharat Bond ETF shows that there is adequate appetite in the market for high grade debt, even if means lower yields. However, this time around it remains to be seen if investors would want to get locked into long term debt assets at a time when bond yields are threatening to go higher.

Also Read About - Types of ETF

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