Moving beyond Sensex and Nifty: How ETFs and mutual funds are mimicking newer indices
Low volatility or value-based ETFs can be considered for staggered investments January 11, 2021 / 10:56 AM IST
Index and exchange-traded funds (ETF) based on the S&P BSE Sensex and Nifty 50 indices have been rolled out by several fund houses over the years. But the preference for these two standard indices has shifted in recent times. In the last two years, 31 ETFs and index funds based on other indices were rolled out. A broader market rally that lifted many more stocks in the year 2020, as opposed to the polarized phases in 2018 and 2019, has also nudged investors to look beyond Sensex and Nifty-based passive funds.
Synopsis
International funds which allocate money in overseas markets also benefited as investors disappointed in the performance of domestic equity schemes shifted a portion of their money to these products.
Some mid- and small-cap funds, typically with lower assets under management, with focused portfolios took advantage of the market upside, delivering higher than market return to investors.
Mutual fund schemes investing in pharma and healthcare, technology and international stocks were the top performers in 2020 a year that tested investors’ nerves with the stock market swinging from extreme pessimism to record highs within nine months. Data from ETIG showed as many as 18 funds from these categories returned more than 50% during the year with five of them giving over 70%. The Nifty has gained almost 15% so far this year.
Suggested InvestmentHorizon: >3 years
Time taken to doublemoney: N.A“It is a roaring one-way bull market, with the indices touching all-time highs. Investors who have missed out and are sitting on cash often tend to come through new fund offers,” said Harshvardhan Roongta, CFP, Roongta Securities.
Some wealth managers believe investors are getting rid of non-performing schemes and reallocating to fresh ideas.
“A significant part of the money that has come into these NFOs is by selling some existing non-performing schemes,” said Gajendra Kothari, Founder, Etica Wealth. He points out that there are several schemes from the top fund houses that failed to beat their benchmark over long periods, and investors are getting rid of these schemes to redeploy that money into NFOs. “Investors tend to be attracted by new ideas,” added Kothari. Finally, many investors still buy the Rs 10 NAV tag and invest in NFOs.
Synopsis Newcomers to the equity market could consider the Passive Flexicap Fund of Fund (FOF) launched by Nippon India Mutual Fund. A first of its kind, this fund will invest in passively-managed schemes index funds operated by Nippon.
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A recent report by SPIVA says over longer horizons, majority of the actively managed large-cap equity funds in India underperformed the large-cap benchmark.
Mumbai: Newcomers to the equity market could consider the Passive Flexicap Fund of Fund (FOF) launched by Nippon India Mutual Fund. A first of its kind, this fund will invest into passively-managed schemes index funds operated by Nippon. While this product will help the less experienced allocate money to passive products as per market conditions, it may not be conducive for the well-heeled partly because of its unfavourable tax structure.
Facing a massive hike in health insurance premiums? Here’s what you can do
Despite IRDAI’s clarifications, policyholders continue to suffer as insurers hike health cover premiums citing high claims December 10, 2020 / 09:27 AM IST
After the insurance regulator-mandated norms on standardisation of health insurance exclusions came into force from October 1, 2020, several policyholders have complained of huge hikes in premiums.
The Insurance Regulatory and Development Authority of India (IRDAI), however, has clarified that that the premium rise due to the change in norms is not beyond 5 percent. “…insurers were permitted to change the base premium by up to +/- 5 per cent of the originally approved premium rates in order to comply with the guidelines on standardisation of exclusions as a one-time measure for seamless transition of existing products to ensure viability and sustainability,” the IRDAI said. By September 30, 2020 premiums increased by up to 5 percent only