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Adani Ports 737.45 (-0.22%)
Asian Paints 3110.45 (-2.21%)
Axis Bank 673.00 (-0.46%)
B P C L 385.90 (1.86%)
Bajaj Auto 3287.85 (-1.22%)
Bajaj Finance 7069.25 (-1.55%)
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Bharti Airtel 718.35 (-1.94%)
Britannia Inds. 3553.75 (-0.69%)
Cipla 912.05 (-1.00%)
Coal India 159.75 (0.28%)
Divis Lab. 4757.05 (-0.42%)
Dr Reddys Labs 4596.50 (-1.42%)
Eicher Motors 2455.55 (0.16%)
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H D F C 2771.65 (-1.29%)
HCL Technologies 1171.40 (-1.12%)
HDFC Bank 1513.55 (-0.80%)
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Hero Motocorp 2462.45 (-0.41%)
Hind. Unilever 2343.65 (-1.66%)
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TCS 3640.45 (-0.07%)
Tech Mahindra 1593.30 (-2.23%)
Titan Company 2369.25 (-0.72%)
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UPL 712.75 (2.08%)
Wipro 640.75 (-0.94%)

What is the Significance of STP in Mutual Fund?

What is the Significance of STP in Mutual Fund?
by 5paisa Research Team 27/10/2021

Investing in exchange-traded funds (ETFs) and mutual funds using the Systematic Investment Plan (SIP) is a common method to comprehend a systematic transfer plan (STP) (SIP).

The use of systematic investment plans (SIPs) gives investors the discipline of investing a certain amount each month. SIPs are arguably the greatest method to deal with investment volatility because of rupee cost averaging and other advantages.

Investment returns on mutual funds may be projected with the use of a SIP calculator. A SIP Calculator can estimate the return on mutual funds and exchange-traded funds or ETFs. Instead, STP is a variation of SIP that enables clients to progressively move assets from one asset management firm to another.

 

It is difficult to set up a SIP if an individual just has a flat sum to invest. If anything, investors are stuck with putting their money in a mutual fund or an ETF and hoping for the best, which they won't get.

Furthermore, investing a large amount of money all at once in equities and debt funds may be very hazardous. Investors may move a predetermined amount routinely from one fund to another via an STP, which is provided by asset management firms.

This post discusses the intricacies of STP in mutual funds followed by its significance for investors.

What is a Systematic Transfer Plan?

STP is a feature that allows unitholders to transfer a selection of predetermined units from one scheme to another on a regular basis. Through seamless asset class switching, the STP service aids investors in rebalancing their investment portfolios.

The usage of these instruments may assist to minimize volatility and achieve financial objectives. Let's say an investor gets a one-time windfall from the sale of a piece of real estate.

Investing in a low-risk money market or liquid fund and then methodically transferring a set amount into an equity fund allows the investor to benefit from rupee cost averaging while generating somewhat better returns than bank deposits.

This is an option for investors. Regular transfers of funds into an equities fund allow investors to relax about the market's fluctuations. You may plan to deposit INR 25,000 a month into an equity fund so that over the following 20 months.

The investor takes advantage of the volatility and manages to decrease the cost of purchase, for example, in case the client earns INR 5,00,000 in a lump sum and invests that in a liquid fund.

They are ideal for investors who want to put a large amount of money to work in equities funds but are concerned about trying to time the market.

 

How does STP Benefit Investors?

1. An Opportunity to Earn Better Returns

STP usually results in more profits. It's because, with an STP, you'll put the lump amount into a debt fund instead of a liquid one. The return on liquid funds may vary from 7 to 9 per cent, which is much greater than the return on a savings account, which is just 4 per cent.

2. Getting Consistent Profit Returns

STP's returns are quite dependable. As long as money is sitting in your source fund (debt fund), you'll continue to accrue interest until you move all of it.

3. Taking Charge of Your Risks

Moving to a less hazardous asset class may be accomplished with the use of an STP. Let's suppose you started a 30-year SIP into an equities fund as part of your retirement savings strategy.

As you get closer to retirement, consider implementing a systematic withdrawal plan (STP) to protect your fund's value.

You tell the fund house to move a certain amount of money from an equity fund to a debt fund upon your instruction. By the time you retire, you'll have all of your money in a secure place.

4. Averaging of the Rupee Cost

Systematic Transfer Plans (STPs) purchase fewer units at higher NAV and more units at a lower price to average out investment costs. Every time your money is moved from one fund to another, the management of that fund buys more units.

As a result, you will benefit from rupee cost averaging, which lowers your investment's per-unit cost over time.

5. Re-establishing Portfolio Equilibrium

Your investment portfolio should include a healthy mix of debt and equity. Investments are moved from debt to equity funds or vice versa using an STP to rebalance the portfolio and achieve greater returns.

STP vs SIP: What Should you Choose?

Investing in a specific fund using STP is similar to setting up a systematic investment plan (SIP). However, if you have a large amount of money to invest, STP is the way to go.

This is due to the fact that under a systematic investment plan (SIP), your money would sit in your bank account, earning no income or earning just a meagre amount of interest, compared to a low-risk liquid fund or an ultra-short-term debt fund.

As a result, it's preferable to put the whole amount into a low-risk debt fund before scheduling an STP to one of your preferred equity funds.

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Sunil Singhania Portfolio

Sunil Singhania Portfolio
by 5paisa Research Team 27/10/2021

Sunil Singhania needs no introduction in stock market circles. As the CIO of Reliance Mutual Fund, Sunil worked closely with Madhu Kela to make Reliance Mutual Fund a formidable name in the mutual fund industry. Sunil Singhania currently runs the Abakkus Fund, but his moves are still tracked closely due to his in-depth understanding of mid-caps and small caps.

As of the close of September 2021, Sunil Singhania (Abakkus) held 27 stocks in the portfolio with a market value of Rs.2,715 crore as of 19th October. Here is a snapshot of his top holdings in rupee value terms.

 

Here is Sunil Singhania's portfolio as of Sept-21.
 

Stock Name

Percentage Holding

Holding Value

Holding Movement

Mastek Ltd

5.7%

Rs.484 crore

No Change

Route Mobile

3.3%

Rs.428 crore

No Change

Jindal Stainless Hissar

3.9%

Rs.298 crore

No Change

Saregama India

1.7%

Rs.127 crore

No Change

IIFL Securities

3.7%

Rs.124 crore

No Change

Acrysil Ltd

6.2%

Rs.124 crore

Reduced in Q2

Somany Home Innova

3.5%

Rs.121 crore

No Change

HIL Ltd

2.6%

Rs.98 crore

No Change

Polyplex Corp

1.6%

Rs.93 crore

Increased in Q2

 

The top-10 stocks account for 70% of the value of the portfolio of Sunil Singhania (Abakkus) as of end Sep-21.

Stocks where Sunil Singhania (Abakkus) added to the holdings

Let us look at the fresh addition of stocks to his portfolio first in the Sep-21 quarter. There were 3 new additions made by Sunil Singhania (Abakkus) during the Sep-21 quarter. These include a 2.5% stake in the Paras Defence IPO worth Rs.88 crore, 2% stake worth Rs.36 crore and 1.5% stake in PSP Projects worth Rs.29 crore.

There were also some stocks where Sunil Singhania increased his positions. He made marginal accretions of 10-20 bps to his positions in stocks like Sarda Energy, Ion Exchange, Somany Home Innovations, HIL and Surya Roshni.

What stocks did Sunil Singhania (Abakkus) downsize in his portfolio?

In the Sep-21 quarter, Sunil Singhania marginally reduced his stake in stocks like Route Mobile and Acrysil Ltd where the reduction in stake was between 10 bps and 30 bps. There were 3 stocks where the stake of Sunil Singhania (Abakkus) fell to below 1% during the September quarter; the reporting threshold for exchange filings. Here are the details.

a) Stake in Nureca Ltd was reduced from 1.4% to below 1%

b) Sunil reduced is stake in UGRO Capital from 1.5% to below 1%

c) The stake in Xchanging Solutions Ltd was reduced from 4% to below 1%

All the above reductions in stake happened during the Sep-21 quarter.

Sunil Singhania (Abakkus) Portfolio Performance in retrospect.

How did the portfolio perform as of the end of September 2021 quarter compared to different time frames in the past. His portfolio currently stands at Rs.2,715 crore but the portfolio reporting only began over the last 3 years. Since the portfolio has also been a subject of fund inflows, we only look at returns over the last one year.

Between Sep-20 and Sep-21, the portfolio value has gone up from Rs.676 crore to Rs.2,443 crore. That translates into annualized portfolio appreciation of 261%. Among his recent additions in the Sep-21 quarter, Paras Defence and Dynamatic Technologies have been virtual multi-baggers and contributed in a big way to the performance in the last one year.

Also Check:-

1) Vijay Kedia Portfolio - September 2021

2) Radhakishan Damani Portfolio - Sept 2021

3) Ashish Kacholia Portfolio - Sept 2021

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Muhurat Trading 2021: Diwali Muhurat Trading Session

Muhurat Trading – 2021
by 5paisa Research Team 27/10/2021

Muhurat Trading 2021 - Samvat 2078

The history of Muhurat trading is almost as old as the Bombay Stock Exchange itself. The business community from Gujarat and Rajasthan, that has traditionally dominated the stock exchange membership and trading considers Diwali an auspicious occasion.

It is considered to be the period when Goddess Laxmi visits the homes and offices of people in all her splendour. Goddess Laxmi is revered as the embodiment of wealth and prosperity so Muhurat Trading 2021 is intended as a harbinger of prosperity through the year.

An interesting piece of information on this topic. The start of the Hindu Samvat calendar approximately corresponds to 56 or 57 BCE. That is why the Samvat calendar is 56 years and 7 months ahead of the English calendar. On the day of Diwali 2021, the Samvat 2078 will be ushered.

The Muhurat Trading is to commemorate the start of the new Samvat 2078. That is when the traditional business community opens their books of accounts and hence it is also celebrated as “Chopdi Pujan”.
 

Muhurat Trading Session

Date - November 4

Trading Time - 6.15 p.m. to 7.15 p.m.


For the year 2021, the Muhurat Trading will be conducted on the stock exchanges on 04-November between 6.15 PM and 7.15 PM. The Muhurat trading time is based on astrologically defined auspicious time of the day.

On 04 November, the block deal session will go on for 15 minutes from 5.45 PM till 6 PM. The pre-open session will take place for 8 minutes between 6 PM and 6:08 PM. The pre-open will be the order collection and the order matching period. You would find it interesting to know that all the trades executed in the Diwali Muhurat trading result in settlement obligations.

Looking back at the previous Muhurat Trading

Last year, the special Muhurat Trading session was held on 14-November 2020. On the previous Muhurat day, the Nifty had closed at the level of 12,780. As of 27-October 2021, the Nifty is up a full 42% since the last Muhurat Trading close. That is surely a lot of wealth created by the stock markets in a span of one year. On the last Muhurat Trading session, the Sensex saw 22 stocks advancing and only 8 stocks declining. 

The best Muhurat trading performance till date happened on the Muhurat Trading session at the peak of the global financial crisis in 2008. During that Muhurat Trading session on 28-October 2008, the Sensex closed with gains of a full 5.86%, the best Muhurat session ever.

Except the Muhurat Trading Time, Stock Market will remain close, check Stock Market Holidays 2021

 

Read More: 7 Stocks to Buy This Diwali 2021

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PB Fintech Limited (Policybazaar) IPO - 7 Things to Know About

PB Fintech Limited (Policybazaar) IPO - 7 Things to Know About
by 5paisa Research Team 27/10/2021

PB Fintech Ltd, the company behind the digital brand Policybazaar, opens its IPO on 01-November. Policybazaar offers an agnostic platform for potential customers to research, compare, shortlist and buy insurance policies online.

Apart from Policybazaar, PB Fintech also offers the highly popular Paisabazaar, which provides online loans and real time credit rating for potential borrowers.

 

Here are 7 things to know about PB Fintech IPO
 

1) Policybazaar was launched in 2008 to offer consumers greater choice and transparency in the choice of insurance policies. Policybazaar offers a wide palate of over 340 products including term policies, health policies, motor, home and travel insurance. 

2) Policybazaar has a 93.4% market share in terms of number of digital policies sold as per a Frost & Sullivan Report. Even if you look at in terms of volumes of policies sold, over 65% of all digital policies sold in India are through the Policybazaar platform. Like most digital plays, PB Fintech is also loss making and it made a loss of Rs.150cr in FY21.

3) Policybazaar has some core strengths like an agnostic platform, ability to execute call to action, deep partnerships with originators, proprietary technology ensuring deep customer intelligence and insights as well as very high renewal rates in the business.

4) The PB Fintech IPO will be open for subscription from 01-November to 03-November. The price band has been fixed in the range of Rs.940-980. The total issue size will be Rs.6,017 crore comprising of a fresh issue of Rs.3,750 crore and OFS of Rs.2,267 crore.

5) The fresh issue component of Rs.3,750 crore will go towards a number of value accretive purposes. Rs.1,500 crore will be allocated to building brand awareness of the PB Fintech family.

It will allocate Rs.375 crore for customer expansion while it has allocated Rs.600 crore for strategic acquisitions and inorganic growth. It will also allocate Rs.375 crore for global expansion plans.

6) The basis of allotment will be finalized on 10-Nov while refunds will be initiated on 11-November. While the shares will be credited to respective demat accounts on 12-November, the shares will be listed on the NSE and BSE from 15-November.

7) PB Fintech has a Marquee list of lead managers including Citigroup, HDFC Bank, I-Sec, IIFL Securities, Jefferies, Kotak Mahindra Capital and Morgan Stanley. Link Intime will be the registrars to the issue.

The PB Fintech issue will be to enhance the visibility of both its digital brands viz. Policybazaar and Paisabazaar. Info Edge, which owns a significant stake in Zomato, also owns a major stake in PB Fintech.

Also Read:

Upcoming IPOs in 2021

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NJ India Made a Record in Maiden NFO

NJ India Made a Record in Maiden NFO
by 5paisa Research Team 27/10/2021

The most recent entrant to the mutual fund space, NJ India Mutual Fund has raised a record Rs.5,200 crore from its maiden NFO of the NJ Balanced Advantage Fund. This is the highest amount ever collected by any maiden NFO by any fund. NJ has been one of India’s top ranked independent mutual fund distributors and that network helped substantially.

For more than 14 years, the record for the highest collection by a mutual fund in its maiden NFO was held by Pinebridge, which had collected Rs.1,104 crore in May 2007.

By that comparison, the maiden NFO by NJ India Mutual fund has collected nearly 5 times the amount. NJ has a larger goal of launching a family of passive funds in India.

NJ India has one of the best agent networks for mutual funds and is the highest commission earning distributor outside of the distributing banks. The NFO leveraged the massive network of over 8,000 distributors of NJ Finvest to sell the NFO.

In fact, NJ was the first case of a pure mutual fund distributor integrating forward towards mutual fund origination.

The NJ Balanced Advantage Fund was obviously influenced by the incredible success of the SBI MF Balanced Advantage Fund. Typically, these balanced advantage funds are also called dynamic allocation funds.

They set a base allocation for equity and debt and then have a rule based reallocation shifting allocations sharply. For example, one rule can be that if PE crosses above a threshold then equity exposure will be cut. It is largely passive in nature.

In the last few months, some of the NFOs have managed to collect huge sums of money. For example, the record NFO collection was by SBI MF Balanced Advantage Fund, which collected a record Rs.14,500 crore. This was followed by the NFO of ICICI Prudential Flexi Cap Fund which collected Rs.9,500 crore.

Check - Flexi Cap NFO

The NJ MF NFO is significant for a number of reasons. Firstly, it will be a test of how much investors are willing to rally behind a new mutual funds. That has been answered.

The second question is whether there is a market for passives. In fact, if you look at the mutual fund AUM, then hybrids and passives today account for over 25% of the total AUM. It appears there is room for passives and NJ may in the right place at the right time.

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PB Fintech Policybazaar IPO - Information Note

PB Fintech Policybazaar IPO - Information Note
by 5paisa Research Team 27/10/2021

PB Fintech Ltd (Policybazaar and Paisabazaar) IPO Note

PB Fintech, the company that owns powerful digital brands like Policybazaar.com and Paisabazaar.com. Policybazaar IPO is opening on 01-November.

While PB Fintech launched Policybazaar way back in 2008, the launch of Paisabazaar was more recent in 2014. The company is looking at the IPO to augment its digital reach and for inorganic growth.

Among the two key properties of PB Fintech, Policybazaar offers an agnostic market place for insurance products.

Individuals can research various insurance  policies, compare them on specified parameters, check out originators and also close the sale with the help of screeners.

Paisabazaar, on the other hand, is a credit and loan syndicator for customers with a digital algorithm based on credit score and past payment records.

 

Key terms of the PB Fintech (Policybazaar and Paisabazaar) IPO
 

Key IPO Details

Particulars

Key IPO Dates

Particulars

Nature of issue

Book Building

Issue Opens on

01-Nov-2021

Face value of share

Rs.2 per share

Issue Closes on

03-Nov-2021

IPO Price Band

Rs.940 - Rs.980

Basis of Allotment date

10-Nov-2021

Market Lot

15 shares

Refund Initiation date

11-Nov-2021

Retail Investment limit

13 Lots (195 shares)

Credit to Demat

12-Nov-2021

Retail limit - Value

Rs.191,100

IPO Listing date

15-Nov-2021

Fresh Issue Size

Rs.3,750.00 crore

Pre issue promoter stake

N.A.

Offer for Sale Size

Rs.1,875.00 crore

Post issue promoters

N.A.

Total IPO Size

Rs.5,625.00 crore

Indicative valuation

Rs.44,051 crore

Listing on

BSE, NSE

HNI Quota

15%

QIB Quota

75%

Retail Quota

10%

Data Source: IPO Filings

 

Here are some of the key points about the PB Fintech business model
 

1. As of Mar-21, Policybazaar has 4.80 crore registered customers and has sold over 1.90 crore policies digitally

2. In the financial year FY21 alone, the total number of visits on the Policybazaar website stood at 12.65 crore making the property extremely valuable

3. While Policybazaar has a 90% share of the digital insurance market, Paisabazaar has 51% of the digital consumer credit market place

4. Between them, Policybazaar and Paisabazaar have 51 insurance partners and 54 lending partners, opening up vistas for cross selling

5. The model is capital light, efficient and being digital, it is substantially scalable in a short span of time

6. The Indian insurance opportunity in terms of premium amount is expected to grow from $100 billion to $500 billion by 2030. As of now digital is just 1% of insurance sales, opening a world of opportunity for Policybazaar.
 

Check: 7 Things to know about Policybazaar IPO
 

Structure of the PB Fintech (Policybazaar and Paisabazaar) IPO
 

The IPO will be a combination of a fresh issue and an offer for sale. Here is a gist of the IPO offer of the company.

1. The fresh issue component will entail the issue of 3.826 crore shares and at the peak price band of Rs.980 per share, the fresh issue amount will be Rs.3,750 crore. 

2. The OFS component will comprise of the issue of 1.913 crore shares and at the peak price band of Rs.980, the OFS value would be Rs.1,875 crore resulting in a total IPO issue size of Rs.5,625 crore.

3. While Softbank of Japan, an early backer of PB Fintech, will be the biggest seller in the OFS, the promoter family consisting of Yashish Dahiya and Shikha Dahiya will also be participating in the OFS.

At the upper end of the price band, PB Fintech with its combined properties of Policybazaar and Paisabazaar will be valued at Rs.44,051 crore.

 

Financials of PB Fintech (Policybazaar and Paisabazaar)

 

Financial Parameters

Fiscal 2020-21

Fiscal 2019-20

Fiscal 2018-19

Sales Revenues

Rs.957.41 cr

Rs.855.56 cr

Rs.528.81 cr

Net Profit

Rs.-150.24 cr

Rs.-304.03 cr

Rs.-346.81 cr

Total Assets

Rs.2,330.73 cr

Rs.1576.00 cr

Rs.751.45 cr

Data Source: Company RHP

Like most of the digital plays, there is a lot of front ending of spending and investments in the case of PB Fintech, which means it still makes losses. However, the losses have been narrowing and in the last one year alone the losses have narrowed from Rs.304 crore to Rs.150 crore.

It is expected that as the publicity and advertisement spend peaks out and as the IPO funds are used for expansion, the profits would gradually begin to show up.

The company plans to use the IPO funds for enhancing visibility of the brands to the extent of Rs.1,500 crore. In addition, it would spend Rs.600 crore on inorganic acquisitions, Rs.375 crore on customer expansion and another Rs.375 crore on international forays.
 

Investment Perspective for PB Fintech (Policybazaar and Paisabazaar)
 

In the case of PB Fintech, it is more about the huge digital opportunity considering that India is underpenetrated both with respect to insurance share and digital share.

a) It has the backing of marquee investors like Temasek, Softbank and Info Edge; all known for picking digital winners early.

b) The 5-fold growth in insurance premium penetration and the mere 1% digital penetration are the two big opportunities for PB Fintech.

c) Traditional valuation metrics will not work in this case as the company makes losses at a net level. The justification for the market valuation has to come from the potential of the business and its scalability. On both the counts, there is little doubt.

Also Read:

Upcoming IPOs in 2021

Fino Payments Bank IPO - Information Note

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