Is this the best time to invest in Index Funds?

Equity market has faced the biggest crash in the last decade due to fast spread of coronavirus and subsequent lockdown.

Big crashes have hit the stock market every few years. However, each crash has typically been followed by a vigorous recovery and rally for 3-5 years.

So while many investors are sitting at losses, this could be an opportunity to invest. But to invest in equity you have to identify good stocks and sectors.

Index funds could be a good option at this point of time. These are funds that typically invest in companies which are part of an index of best companies from a particular theme or sector.

“Index funds are the least risky funds. But it will be subject to market ups and downs,” says Harsh Jain Co-founder and COO Groww.

Right time to invest

Buying cheap is the mantra for any successful investment. Investors who have bought cheap are bound to benefit more when market recovers. “Markets have corrected a lot. The price earning (PE) ratio which was trading at more than 30 is now trading at 20.5. Last month it had touched 17.57, but substantially corrected. Same way dividend yield of Nifty 50 right now is 1.67% (April 9, 2020), which is very attractive considering the historical yield of as low as 0.9%,” says Nitin Shahi, Executive Director of FINDOC.

Further correction in the equity market cannot be ruled out. “Saying that the markets have corrected, one cannot confirm that the markets have bottomed out. In the recent past only the Nifty was trading at 7,500 (the PE Ratio was 17.57 and dividend yield was around 2.0) which is now trading at 9000+,” says Shahi. However, most of the experts agree that major correction has already taken place and even if there is a further correction it is unlikely to be as big as before.

Saves risk of picking wrong stocks

When market have gone through a crash and the dust is yet to settle, many investors will have concerns whether it is right time to go for fresh investment. “Many stocks are trading at very attractive valuations. For a retail/layman investor it will be very difficult to identify these stocks. But since the market has corrected substantially, one can invest through index funds,” says Shahi of FINDOC. This

Even if you are willing to invest through actively managed mutual fund schemes, the chances of an index fund giving better return will be higher. “Under the current environment, markets are complex and volatile. It will be challenging for funds to showcase performance. This is the opportune time to consider alternatives such as index funds,” says Rahul Jain, Head, Edelweiss Wealth Management.

Should you invest lump-sum or go for SIP?

If you have investible surplus, a lump-sum investment at one go may not be a good idea. “I would suggest that investors should invest up to 30% of his/her desired portfolio at current levels and either wait for deeper correction or use SIP mode for remaining 70% of the corpus,” says Shahi.

You may also follow staggered investment if you just want to invest lump-sum. You may start with investing at least 30% at current level. If the market corrects by 10% more, you can invest 40% and if it corrects by 20% you can invest the remaining 30%. However, if you do not see any further downside in next 2-3 months you may invest a part and wait for another quarter to invest the rest.

Which index fund should you invest in?

Even in index fund you have many options which range from market capitalisation based indexes to sectoral indexes. “Right now FMCG, pharma and IT indices are in demand but I would recommend only diversified funds as these indices and stocks of the indices mentioned above are trading at 52-week high prices. It would be better to invest in diversified funds like Nifty, Sensex or Nifty Next 50 funds. When the markets recover we can see creation of wealth by investing in these index funds,” says Shahi.

Rahul Jain of Edelweiss also supports this view. “Globally, investors have access to a variety of funds that mirror various indexes available. However, in India, it is advisable for investors to invest in index funds based on the Sensex and the Nifty,” he says.

Same index fund is offered by many fund houses, forcing investors to make a choice. “An investor has to carefully consider the expense ratios of such funds and tracking error in percentage terms. In addition to the limited universe of stocks available which impact performance of the fund,” says Jain. Tracking error is deviation of return of the index fund from the index due to various technical and operational issues. You should go for the fund which has the lowest tracking error.

BT Insight: Where 6 Franklin Templeton funds got stuck; recovery tougher

The fate of investors of the six closed debt funds and other fund of funds (FoF) investors will depend upon how quickly the Franklin Templeton fund house is able to sell all its securities. Though RBI’s liquidity push of Rs 50,000 crore may prevent the spread of liquidity crunch to other funds in the near future, the FT investors’ road to recovery looks distant. What are the challenges the fund house will face in selling off its assets and paying back the investors?

Higher the proportion of sovereign and cash investments of a debt fund, easier it is to wind up the exposure. However, the fund house has already sold most of its sovereign debt securities to handle the redemption pressure since August 2018. As per the report from B&K Securities, these six schemes faced a total redemption of Rs 20,879 crore till 23 March, 2020. Now, it is left with mostly corporate debts which will be very difficult to sell in current market conditions. As per a report from Transfin, out of total gross assets of Rs 29,171 crore on 23 April, 2020 the corporate debt asset is Rs 26,240 crore, which is almost 90% of the total assets.

These six funds have the biggest exposure in top 10 holdings, which entail 45% of the fund’s gross assets. If the fund house manages to sell these top 10 debt securities quickly, it will boost ability to liquidate the remaining assets.

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The fate of investors of the six closed debt funds and other fund of funds (FoF) investors will depend upon how quickly the Franklin Templeton fund house is able to sell all its securities. Though RBI’s liquidity push of Rs 50,000 crore may prevent the spread of liquidity crunch to other funds in the near future, the FT investors’ road to recovery looks distant. What are the challenges the fund house will face in selling off its assets and paying back the investors?

Higher the proportion of sovereign and cash investments of a debt fund, easier it is to wind up the exposure. However, the fund house has already sold most of its sovereign debt securities to handle the redemption pressure since August 2018. As per the report from B&K Securities, these six schemes faced a total redemption of Rs 20,879 crore till 23 March, 2020. Now, it is left with mostly corporate debts which will be very difficult to sell in current market conditions. As per a report from Transfin, out of total gross assets of Rs 29,171 crore on 23 April, 2020 the corporate debt asset is Rs 26,240 crore, which is almost 90% of the total assets.

Top 10 holdings key to liquidation

These six funds have the biggest exposure in top 10 holdings, which entail 45% of the fund’s gross assets. If the fund house manages to sell these top 10 debt securities quickly, it will boost ability to liquidate the remaining assets.

It is easier said than done because none of these top holdings are sovereign or AAA rate debt. The greatest indicator of the scale of the problem is that the funds are left with no AAA rated securities in their top 20 holding. All securities are either AA rated or below. This curtails the funds’ ability to find enough buyers.

Quickest recovery to come from AA rated securities

The only glimmer of hope is the next highest rate holding, which are AA rated securities. The funds have Rs 11,178 crore exposure in AA rate debt securities, which makes for almost 38% of the remaining assets. This is a big chunk and comparatively low hanging fruit which the FT schemes can sell at earliest.

Zoom CEO says the organization is American, not Chinese

claims of him and his organization being Chinese.

Yuan said that he turned into a resident of America in 2007 and that Zoom is an American organization.

Yuan said that Zoom has activities and representatives like other worldwide innovation organizations in China.

Zoom CEO, Eric Yuan in a blog entry expressed that his organization is American and Chinese. The disputable video calling application is presently confronting claims of having a Chinese connection. Yuan in a blogpost disproved these claims.

“As of late, questions have likewise been raised about Zoom and China. From the outset, this appeared to originate from an impermanent misconfiguration in our worldwide server farm directing that we fixed. Be that as it may, outside of that separated occurrence, in the previous scarcely any weeks, we have seen debilitating gossipy tidbits and falsehood springing up,” Yuan composed.

He further gave a full record of his track history on the blog. He said that he turned into an American resident in 2007 and has lived in America since 1997.

He likewise expressed that Zoom is an American organization, established and headquartered in California, joined in Delaware, and traded on an open market on NASDAQ

Yuan said that Zoom has tasks and representatives like other worldwide innovation organizations in China. He said that these organizations are worked by the auxiliaries of the US parent organization.

“Our specialists are utilized through these auxiliaries. We don’t shroud this. Unexpectedly, we reveal this kind of data in our open filings, as suitable. Our tasks in China are tangibly like our U.S. peers who likewise work and have representatives there.” Yuan composed.

Not long ago, Zoom recognized that it doesn’t have in excess of 300 million every day dynamic clients, as it guaranteed prior, The Verge revealed.

Zoom gave out an explaining articulation in the wake of altering the quantities of dynamic clients to meeting members. The distinction between the two is noteworthy, the report expressed. Day by day dynamic clients are tallied once every day though meeting members can be considered on various occasions a day relying upon the occasions they utilize the video calling application.

Zoom later explained saying that it inadvertently alluded to members as clients and individuals.

Zoom has been censured for its security issues. The application saw forbidding from different stages who refered to digital security issues. To give some examples organizations who did this were Google, SpaceX, and Standard Chartered. The legislature of Taiwan requested that its offices not use Zoom and in the latest move, the Government of India gave a security warning refering to that utilizing Zoom is “undependable.”

Zoom, in any case, acquired various highlights like setting meeting passwords and lounge areas as a matter of course on the stage. Enabling the record administrator to pick if their information is directed through explicit server farm areas, expanding secret phrase multifaceted nature, and so on.

Given to PM CARES Fund? Here’s in what manner can spare annual assessment

Key features

Any gift to PM CARES finance qualified for 100 percent charge conclusion under Section 80G

Cutoff time for making charge sparing gift for FY20 stretched out till June 30

Utilize this window to make gift and guarantee derivation on earlier year’s pay

On the off chance that you cause two gifts you to can guarantee reasoning for two distinct years

The conclusion is pertinent just when you choose old assessment system with charge reasoning

Coronavirus pandemic isn’t only the most noticeably terrible wellbeing emergency yet additionally the hardest financial test that any legislature has looked since freedom. A critical piece of the populace can’t take care of itself without work because of continuous lockdown. Government has a troublesome undertaking of overseeing assets to take care of poor people, spare the economy and give best treatment to all coronavirus patients.

In such a circumstance, empathy of its residents helps the legislature. To empower the individuals to contribute, the Union government thought of PM Cares support in which individuals can give and appreciate tax reduction.

“The gifts made to the PM CARES Fund would be qualified to get 100 percent conclusion under Section 80G of the Income Tax Act. This basically implies you won’t need to pay any assessment on the sum gave to PM CARES Fund. An additional preferred position to this is the breaking point on finding (10 percent of gross pay) will likewise not make a difference on this gift,” says Pranjal Kamra, CEO, Finology.

The supreme measure of expense sparing that you can do through this gift will rely on your personal assessment section. “The finding can spare assessments dependent on the personal duty chunk in which the citizen’s pay is burdened. The gifts will have the option to spare 31.2 percent (in addition to relevant extra charge) in charges at the pinnacle pace of assessment,” says Archit Gupta, Founder and CEO – Cleartax.