India becomes investment darling for sovereign wealth and pension funds

26 June, 2019

Wealth and state pension funds are expanding their horizons to private markets, to complement an existing focus on stocks and bonds.

Sovereign wealth funds are piling into India, buying stakes in everything from airports to renewable energy, attracted by political stability, a growing middle class and reforms making it more enticing for foreigners to invest. Wealth and state pension funds are expanding their horizons to private markets, to complement an existing focus on stocks and bonds. Almost every jurisdiction in the western world is raising the bar for entry for foreign investors but in India it's the other way round. There's also the attraction of the demographics and a lot of assets that sovereign funds like, such as infrastructure, where there's a huge appetite for foreign funding. 

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Indian Prime Minister Narendra Modi's election win last month consolidated his Hindu nationalist party's power base and is expected to stimulate further foreign investment. Foreign institutional investor flows into Indian equities are $11 billion year-to-date, surpassing the total annual tally in each of the four previous years and setting 2019 on course for the highest annual inflows since 2012. India's benchmark BSE Sensex has soared nearly 10% year-to-date.  

THE NEW CHINA  

The attention sovereign funds are giving India is like that they have paid to China. Private equity deal activity in India surged to $19 billion in 2018, the highest level in at least a decade, according to PitchBook data. Sovereign wealth funds and pension funds participated in about two-thirds of that amount. Among recent deal, Singapore's GIC sovereign wealth fund and the Abu Dhabi Investment Authority (ADIA) this month agreed to make a further investment of $495 million in renewable energy firm Greenko Energy Holdings, which has wind, solar and hydro projects. India is widening its use of solar and wind energy to help reduce its reliance on fossil fuels.

In April, ADIA and India's National Investment & Infrastructure Fund (NIIF) agreed to buy a 49% stake in the airport unit of Indian conglomerate GVK Power & Infrastructure. Another wealth fund is in talks on an infrastructure investment, while Canadian pension funds are seeking similar deals. Canada Pension Plan Investment Board and GIC earlier this year participated in a $145.8 million buyout of Oakridge International School, an operator of schools in India.

ADIA, the world's third-biggest sovereign wealth fund, which has been investing in Indian equities and fixed income for years, has broadened its focus to include asset classes such as infrastructure, real estate and private equities. Its increased interest in India is driven by the country's strong growth potential, positive demographics and continued economic development. More than half of India's 1.3 billion population is aged under 25.The push comes as India and the United Arab Emirates seek to strengthen economic and trade ties.

REFORM PUSH

Regulatory reforms are also bolstering sentiment and drawing in wealth funds. Indian-based fund managers were from this year licensed to manage foreigners' portfolio holdings in the country, where previously such assets had to be managed outside India.

Bankruptcy resolution rules introduced in 2016 helped pave the way for ADIA's $500 million investment earlier this year in a distressed debt fund. The investment was seen as an effort to launch a secondary market in India's mountain of distressed debt and help ease the burden on local banks.

Omprakash Shahi,
Managing Director,
Nidhi Broking Services Pvt. Ltd.

For Complete Information About Investment Planner in Thane, Contact Nidhi Broking Services Pvt. Ltd. On 022 - 2530 3690 / 022 - 2530 1134 Or Email Us At - info@nidhibroking.com

Systematic Withdrawal Plan (SWP) in Mutual Fund

25 June, 2019

Mutual fund investors are opting for Systematic Withdrawal Plans to meet monthly cash flows and this is emerging as a preferred mode as compared to dividend.

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1. What is a Systematic Withdrawal Plan (SWP)?

Systematic Withdrawal Plan (SWP) is a facility by which investors can withdraw a fixed amount from a mutual fund scheme. The frequency of withdrawal could be monthly or quarterly, though the monthly option is most popular. Investors can customise cash flows they can withdraw just a fixed amount or even opt to withdraw just the capital gains on his investments.

2. How can an investor start one?

A SWP can be started any time. It can be done while making the first investment. If you are an investor in a scheme. You can just activate the SWP option in the scheme, whenever you feel the need to simply fill out an instruction slip with the AMC stating the folio number, the withdrawal frequency, and date for the first withdrawal and the bank account to credit the proceeds.

3. Why is SWP finding favour with financial advisors now?

Dividend is subject to a dividend distribution tax, while capital gains up to Rs. 1 Lakh in a financial year, are tax free in the hands of an investor. In addition, dividend cannot be guaranteed by a mutual fund and is subject to market movement, distributable surplus and profits made by a scheme. As compared to this, SWP is more reliable than a dividend and is set up by the investor himself.

4. What are the tax implications in a SWP?

SWP is periodic withdrawal, which translates into redemption of units from the scheme. Hence, the tax treatment of each withdrawal will be the same as is applicable to equity and debt funds. Hence, for units where the period of holding has not crossed 120 months for equity-oriented funds, investors will have to pay a short term capital gains tax.

For debt funds, there will be a tax liability (short-term capital gains on holding for less than 36 months and long-term capital gains on longer holding periods). In addition, investors also need to factor in the exit load of the scheme. If it is from an equity fund which has a 1 % exit load before the end of one year, the investor will have to bear the same.

For Complete Information About Systematic Withdrawal Plan (SWP) in Mutual Fund,Contact Nidhi Broking Services Pvt. Ltd. - Best Mutual Fund Advisors in Thane, On 022 - 2530 3690 / 022 - 2530 1134 Or Email Us At - info@nidhibroking.com

About Systematic Investment Plan {SIP}

22 June, 2019

Lately, SIP mutual funds have become the talk of the town. Investors seem excited and are eagerly venturing into this option over the traditional bank fixed deposits. Especially those investors who want to enter stock markets but don’t have the required time are aggressively investing in SIP mutual funds. And why not; after all equity is asset classes which can help you generate wealth over the long term. SIPs are actually an ideal way to invest over a one-time investment. That too when it comes to mutual fund investing, you get multiple advantages from all corners. SIP mutual funds not only help to become rich but also create a win-win situation for the investor.

Let’s know how it is an ideal investment option.

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1. Develop the habit of saving

One of the crucial advantages of SIP is that it helps to build the habit of saving and investing simultaneously. It inculcates a feeling of commitment in the investor because you have to keep aside a fixed amount each month for investment purposes. Additionally, as the amount to be set aside is very nominal i.e. as low as Rs 500 to Rs 1000, you don’t feel the burden on your shoulders. SIPs have helped to change the entire perspective towards saving and investing. You don’t postpone your decisions to a future date and are in a better position to start investing as soon as possible.

2. Achieve financial objectives

If you don’t have a plan, then it becomes quite difficult to achieve the things you want in life. A similar situation happens in case of life goals also. You may have thought of buying a house or going on an exotic vacation. But you don’t know how to realise your dreams. In this scenario, SIP mutual funds help in ways more than one. Whether it is a short-term or long-term goal, SIP can make things possible. Since the whole process of SIP is so much goal-oriented and disciplined that it keeps you on the right track. You are able to achieve your goals in the expected time. Moreover, in case of a majority of open-ended funds, you enjoy a lot of liquidity. This allows you to withdraw your investments during emergencies.

3. Lower cost of investment

It is fairly ok to have wealth creation expectations from your investment. Especially, in case of equity investments you got to have a robust strategy to make money. Yet another less complicated way of making money is to lower your overall costs involved in investment. SIP mutual funds enable this in a streamlined fashion through the process of rupee-cost averaging. In this, the fund manager keeps buying units of the said mutual fund scheme with your monthly SIPs irrespective of the state of stock markets. Hence, during slump more units are bought and during rally lesser units will be bought. In this way, your average per unit cost of investing reduces dramatically. Moreover, you are freed from the worries of timing the market.

4. Enjoy power of compounding

Compounding happens when you earn interest on the interest already generated. In this, both of your initial investment and interest earned on it are used to find out the interest for the next periods. When you invest in SIP mutual funds, you enable power of compounding to work on the invested money. Thus, you are able to earn higher returns as you move ahead in your investment journey. Compound interest makes your money grow faster because interest is calculated on the accumulated interest over time as well as on your original principal. Compounding can create a snowball effect, as the original investments plus the income earned from those investments grow together. 

Compounding works well when you stay invested for longer period of time. It is because of this reason that even smaller amounts like Rs 500 invested every month turns into a big corpus after some point of time. That’s why it is always beneficial to start investing as early as possible. Compounding interest is interest calculated on the initial principal, which also includes all of the accumulated interest of previous periods of a deposit or loan. Interest can be compounded on any given frequency schedule, from continuous to daily to annually. When calculating compound interest, the number of compounding periods makes a significant difference. Compound interest is calculated by multiplying the initial principal amount by one plus the annual interest rate raised to the number of compound periods minus one.

Albert Einstein states "Compound interest is the greatest wonder in the world. He who understands it earns it...he who doesn't pays it."

5. Advantage of diversification

You should keep all your eggs in the same basket. Same principle applies in investing also. Instead of putting all your money in one asset, you need to assign it in different asset classes. If it’s within same asset class like equity funds, you need to own at least 4-5 different equity funds in your portfolio. This mechanism is known as diversification. It involves spreading your investment amongst multiple securities to reduce the risk of fluctuations in returns. While investing in SIP mutual funds, you get the advantage of diversification. With a nominal amount of Rs 500, you are able to get a wider exposure across asset classes, sectors, industries and market capitalizations. In this way, your firm-related risks are reduced which enhances your chances of wealth creation.

For Complete Information About Systematic Investment Plan, Contact Nidhi Broking Services Pvt. Ltd. - Mutual Fund Consultant and Advisor Thane, On 022 - 2530 3690 / 022 - 2530 1134 Or Email Us At - info@nidhibroking.com