The BSE Power Index has emerged as one of the top three performers over the past year, delivering impressive returns of 86%. This surge has been largely fueled by India’s ambitious renewable energy push, making the sector one of the most attractive for investors.

With the government aiming to achieve 500 GW of renewable capacity by 2030, and initiatives like the National Solar Mission and substantial investments in solar, wind, and hydro energy, the power sector is well-positioned for solid growth. India’s commitment to clean energy has seen the country surpass Japan to rank third in the Lowy Institute’s Asia Power Index.

The index’s strong performance is also reflected in its price-to-earnings (P/E) ratio of 32.48, which signals strong demand from investors. This P/E ratio showcases the robust infrastructure of India’s energy sector as it transitions towards sustainable development on multiple fronts.

Since the pandemic, there has been a noticeable uptick in power demand, particularly from industries and commercial sectors. This surge has driven revenues for power companies, further boosting the sector.

Looking ahead, it can be assumed that FY25 will continue to see growth in the power sector, driven by ongoing renewable energy expansion, ESG (Environmental, Social, and Governance)-focused investments, and the modernization of power grids. These factors are expected to attract even more investment into the sector. As countries around the world prioritize cleaner energy, India’s power sector is poised to benefit from these trends.

Mutual fund (MF) schemes with significant exposure to the power sector have reaped the benefits of this surge. As of August 2024, the total market value of mutual fund investments in the power sector was ₹1.1 lakh crore. The power sector’s strong performance has made it a favorite among fund managers, with several large-cap, mid-cap, and small-cap stocks seeing significant investment.
Here are some of the most popular power stocks among active mutual fund managers as of August 2024 (Source: ACEMF):

Large-Cap Power Stocks:

NTPC
Number of active MF schemes holding the stock: 294

Power Grid Corporation of India
Number of active MF schemes holding the stock: 167

Tata Power Company
Number of active MF schemes holding the stock: 87

JSW Energy
Number of active MF schemes holding the stock: 35

NHPC
Number of active MF schemes holding the stock: 33

Adani Energy Solutions
Number of active MF schemes holding the stock: 26

Mid-Cap Power Stocks:

Torrent Power
Number of active MF schemes holding the stock: 54

NLC India
Number of active MF schemes holding the stock: 41

Small-Cap Power Stocks:

Kalpataru Projects International
Number of active MF schemes holding the stock: 68

CESC
Number of active MF schemes holding the stock: 56

The BSE Power Index’s remarkable performance is a testament to India’s ambitious renewable energy goals and the sector’s robust growth prospects. As the country continues its push towards achieving 500 GW of renewable energy by 2030, the power sector is set to remain a key focus for investors, supported by favorable government policies and increasing global demand for clean energy. With mutual funds actively increasing their exposure to power stocks, the sector is positioned for continued growth and solid returns in the coming years.

The Securities and Exchange Board of India (SEBI) has taken a significant step towards expanding investment options for Indian investors by proposing a new asset class. This move aims to bridge the gap between mutual funds (MFs) and portfolio management services (PMS), catering to investors with investible funds ranging from Rs 10 lakh to Rs 50 lakh.

Key features of the new asset class

• Higher risk, higher returns: The new asset class will offer investors the opportunity to invest in products with higher risk-taking capabilities, potentially leading to higher returns.
• Minimum investment threshold: To deter retail investors and target a specific investor profile, SEBI has proposed a minimum investment of Rs 10 lakh per investor.
• Flexibility in investment: The new asset class will allow for investments in derivatives, beyond hedging and rebalancing purposes, providing greater flexibility to fund managers.
• Eligibility criteria: To ensure expertise and financial stability, SEBI has outlined stringent eligibility criteria for mutual fund houses to launch this new asset class.

The introduction of this new asset class is a strategic move by SEBI to address the proliferation of unregistered and unauthorized investment products in the market. By offering a regulated and transparent investment avenue, SEBI aims to protect investor interests.

While the proposal has been met with positive responses from the industry, experts have raised concerns about the eligibility criteria and the potential need to include PMS providers in the framework. Expanding the pool of eligible managers could enhance competition and benefit investors.

The new asset class is expected to introduce a new era of investment options for Indian investors, offering greater customization and potentially higher returns. However, investors are advised to exercise caution and conduct thorough research before investing in such products.

As Finance Minister Nirmala Sitharaman prepares to present the Union Budget 2024 later this month, the mutual fund industry is eagerly awaiting significant announcements. Expectations within the industry are varied, including hopes for tax incentives and the introduction of debt-linked savings schemes. Fund managers, however, do not anticipate major policy shifts due to the continuity of the current government.

Key expectations from the mutual fund industry:

Tax concessions in debt mutual funds

The Association of Mutual Funds in India (AMFI) has requested that capital gains on redemption of units of debt-oriented mutual funds held for more than three years be taxed at a rate of 10% without indexation, similar to debentures. “India’s aspirations of becoming the third-largest economy by 2027 and a developed country by 2047 require a liquid, deep, and well-functioning debt market. An active bond market could lower the cost of long-term finance and encourage retail investor participation, diversifying their investments. Therefore, an amendment to the Finance Act, 2023, is needed to align the tax rate on mutual fund units with that on bonds, debentures, SDLs, and G-secs,” AMFI stated.

Long-term capital gains (LTCG) exemptions

AMFI proposes that LTCG on listed equity shares or units of equity-oriented fund schemes be exempted from capital gains tax if held for at least three years. Alternatively, they suggest increasing the existing threshold limit to Rs 2 lakh per financial year. “The current threshold limit of Rs 1,00,000 per year is too low. Exempting LTCG tax after a three-year holding period will encourage long-term investments in equities and channel more household savings into the equity markets, benefiting the Indian economy,” AMFI noted.

Tax benefits under section 54 EC for special MF units

AMFI recommends including mutual fund units, with underlying investments in specified infrastructure subsectors, in the list of long-term assets qualifying for tax exemption under Sec. 54EC. These mutual fund units could have a three-year lock-in period to be eligible for this exemption. “Providing tax benefits under Sec. 54 EC for investments in specified mutual fund schemes can offer investors an alternative investment avenue with market-related returns and ease the government’s burden of borrowing for infrastructure funding,” AMFI noted.

More exemptions for mutual funds

AMFI suggests that the income of mutual funds be taxable in the hands of investors. Given the role of the Corporate Debt Market Development Fund (CDMDF) in the Indian debt markets, a similar tax regime to that of mutual funds should be introduced for CDMDF, exempting its income and taxing distributions in the hands of investors.

“To provide ‘unit level taxation’ to CDMDF, section 10(23D) of the Act should be amended to extend the exemption provided for mutual funds to CDMDF by deeming it a mutual fund for limited purposes of the Act,” AMFI added.

Income tax laws allow adjusting the sale price of a capital asset for inflation to tax only real gains. Indexation modifies the cost of a capital asset to account for inflation, reducing net long-term capital gains (LTCG). However, the benefits of indexation for debt mutual funds acquired on or after April 1, 2023, were eliminated in Budget 2023.

The mutual fund industry eagerly anticipates the Union Budget 2024, hoping for announcements that will support its growth and benefit investors. Key areas of focus include tax concessions, LTCG exemptions, and extending tax benefits to special mutual fund units and the Corporate Debt Market Development Fund. These changes could drive long-term investments and enhance the financial ecosystem in India.

As more retail investors chant the ‘mutual fund sahi hai’ mantra, asset management companies are trying to cash in on the enthusiasm through offbeat offerings. From tourism to business opportunities, mutual funds are launching a slew of new fund offerings (NFOs), specifically in the thematic and sectoral funds space.

Highlights:

• June 2024 AMFI adta: NFO equity inflows (active) surged 54.1% month-on-month to Rs 151.4 billion.
• Tata AMC Nifty tourism index fund: Launched the first-ever tourism-focused fund, including travel and tourism-related industries. Open for public subscription from July 08 to July 19, 2024.
• ICICI Prudential oil and gas ETF: Another industry first, open for subscription from July 08 to July 18, 2024.
• Increased niche passive NFOs: Around 67 draft offer documents filed across fund houses in the last three months.

SEBI data indicates continued growth in niche areas such as digital technology, transportation, logistics, and more.
Market experts suggest that this trend will persist as investors look for thematic funds for both long-term and tactical allocation. The diverse audience in India means that niche products can suit a significant number of investors. Additionally, some industry observers believe that the rush of passive thematic NFOs allows mutual funds to bypass SEBI’s rule of only one scheme per category, leveraging the strong performance of various sectors over recent years.

The Indian Mutual Fund industry remains on a positive trajectory, driven by consistent SIP inflows and growing investor confidence in equity markets. The industry’s ability to weather market volatility and offer diverse investment options positions it as a key player in wealth creation for Indian investors.

SIPs, a popular method for regular investment, continued to drive growth, with the number of new SIPs reaching 55.13 lakh and total SIP AUM reaching an all-time high of ₹12.44 lakh crore. Sectoral/Thematic funds led inflows with ₹22,351 crore, boosted by new fund offerings (NFOs). Multicap, Large cap, and Mid cap funds also saw significant inflows, while Small cap funds experienced a decline. June witnessed initial volatility due to election results, with benchmark indices dropping sharply before recovering and closing the month with a gain of around 7%. Debt funds, excluding money market and low-duration funds, saw net outflows attributed to advance tax payments and quarter-end activities.

The Indian Mutual Fund industry witnessed significant growth in June 2024, with key highlights including:

• Surge in equity investments: Equity mutual funds saw a record inflow of ₹40,608 crore, up 17% from May. This marks the 40th consecutive month of positive inflows for equity funds.
• SIPs reach new milestone: Systematic Investment Plans (SIPs) reached a new high of ₹21,262 crore, surpassing the ₹20,000 crore mark for the third month in a row.
• Industry AUM crosses ₹60 lakh crore: Total Assets Under Management (AUM) for the industry reached a record ₹61.16 lakh crore, exceeding the ₹60 lakh crore mark for the first time.
• Debt outflows: Debt Funds experienced net outflows of ₹1,07,357 crore, primarily due to advance tax payments and quarter-end adjustments.

ICICI Prudential Mutual Fund has introduced the ICICI Prudential Energy Opportunities Fund, an open-ended equity scheme focused on the energy sector. The fund opened for public subscription on July 2, 2024, and will remain open until July 16, 2024. The scheme will re-open for continuous sale and repurchase within five business days from the date of allotment.

Key features of ICICI Prudential energy opportunities fund

• Investment theme: Focuses on traditional and new energy sectors, along with allied business activities
• Objective: Long-term wealth creation through investments in companies benefiting from growth in the energy sector
• Eligibility: Suitable for investors looking for long-term capital appreciation

The scheme aims to provide opportunities for long-term capital appreciation by investing in equity and equity-related instruments of companies involved in exploration, production, distribution, transportation, and processing of traditional and new energy. Sectors include oil & gas, utilities, and power.

Investment details

• Minimum investment: ₹5000 per plan/option, with increments of Re 1
• No upper limit: Investors can invest any amount
• Benchmark: Nifty Energy TRI Index, comprising companies from petroleum, gas, and power sectors
• Entry load: None
• Exit load: 1% if redeemed or switched out within three months from the date of allotment. Nil if redeemed or switched out after three months from the date of allotment.
• Risk factor: The scheme is categorized as “Very High Risk.” Investors should consult financial advisors to ensure suitability.
• Subscription details: Public Subscription Period: July 2, 2024 – July 16, 2024.
• Continuous sale and repurchase: Re-opens within five business days from the allotment date.

For more information, investors can refer to the Scheme Information Document and consult with financial advisors to assess the suitability of this high-risk, high-reward investment opportunity.

Kotak Mahindra Asset Management Company has introduced the Kotak Special Opportunities Fund, an open-ended equity scheme with a special situations theme. The scheme opened for subscription on June 10, 2024, and will close on June 24, 2024. Investors can start investing in the Kotak Special Opportunities Fund with a minimum investment of Rs 100 per plan/option and in multiples of Re 1. There is no upper limit for investment.

The primary objective of the Kotak Special Opportunities Fund is to generate long-term capital growth by investing in equity and equity-related securities of companies benefiting from various special situations. These special situations include company-specific events, corporate restructuring, government policy changes, regulatory changes, technology-led disruptions, and temporary but unique challenges faced by companies.

The fund will seek opportunities across all market capitalizations and sectors, ensuring a diversified portfolio. Managed by Mr. Devender Singhal, who has over 22 years of experience in the Indian equity markets, the fund aims to navigate the economic ups and downs by capitalizing on special situations.

Nilesh Shah, Managing Director of Kotak Mahindra Asset Management Company, highlighted the dynamic nature of the Indian market, citing examples like the Production Linked Incentive (PLI) scheme and the China+1 strategy creating opportunities in the electronics manufacturing sector. He emphasized that special situations can arise in companies of any size, providing the fund with the flexibility to invest across various market caps and sectors.

Devender Singhal, the Fund Manager, pointed out that multiple events such as policy changes, mergers and acquisitions, industry consolidations, and management changes can impact a company’s trajectory. The fund aims to identify and capitalize on such special situations, requiring professional analysis to assess the impact of uncertain events.

Biraja Tripathy, Head of Products at KMAMC, stated that broad thematic funds like the Kotak Special Opportunities Fund can be strategically allocated in investors’ portfolios due to their diversified nature, unlike sectoral funds that focus on a single sector.

Seize the opportunity to invest in the Kotak Special Opportunities Fund and benefit from the dynamic and ever-changing Indian market.

The stock market’s recent success stories have many itching to invest. But where do you start? Don’t worry, this guide will unveil the exciting world of stocks and mutual funds, making it easy for beginners to navigate.

Imagine two friends, Narendra and Rahul, with a thriving business. To expand, they need more funds. Traditionally, they could borrow money (loans) or bring in new partners by selling shares of ownership in their company.

As companies grow, they often seek a wider pool of investors. This is where the stock exchange comes in. Companies “go public” by listing their shares on a stock exchange, allowing them to raise capital by selling ownership stakes (stocks) to the general public.

While the concept seems simple, the stock market can be daunting. Numerous factors like stock prices, entry/exit points, and technical analysis require in-depth knowledge.  Professional investment management services can be expensive and often have high minimum investment requirements.

Mutual funds: Your key to stock market participation

Mutual funds offer a solution!  They pool money from many investors and invest it in a variety of stocks, managed by a professional fund manager.  This allows you to:

• Invest with less: Start with a lump sum (as low as Rs. 5,000) or invest regularly through Systematic Investment Plans (SIPs) starting at Rs. 500.
• Diversification: Spread your investment across multiple companies, reducing risk compared to picking individual stocks.
• Expert management: Benefit from the expertise of a fund manager who handles investment decisions and market complexities.
• Lower fees: Mutual funds offer low fees compared to individual portfolio management services.
• Convenience: Easily buy and sell mutual funds through online platforms.

Choosing the right mutual fund:

Selecting the right mutual fund depends on your financial goals and risk tolerance. Here are some key factors to consider:

• Investment purpose: Are you saving for retirement, a down payment on a house, or short-term goals?
• Investment source: Is this your spare cash or money you rely on for regular expenses?
• Investment tenure: How long can you invest this money? Longer timeframes can handle higher risk.
• Risk appetite: Are you comfortable with potential losses for higher returns (aggressive) or prefer stability (conservative)?
• Investment frequency: Will you invest a lump sum or invest regularly through SIPs?

Mutual funds: Your stepping stone to financial success

Successful investing is a marathon, not a sprint. Start small, be patient, and choose a mutual fund that aligns with your goals. With this knowledge, you’re well on your way to unlocking the potential of the stock market through mutual funds!

India’s leading asset management companies (AMCs) reported an impressive average revenue growth of 38% year-on-year in the March quarter, driven by the continued financialization of savings that boosted their assets under management (AUM). This robust performance has led brokerage firms to revise their earnings forecasts for FY25 and FY26.

Kotak Institutional Equities has increased its earnings forecast for Aditya Birla Sun Life AMC, UTI AMC, and Nippon Life India AMC by 3-10% following the strong March quarter earnings. However, it has lowered its forecast for HDFC AMC by 2-3%, despite a 30% growth in core earnings for the quarter, which fell short of their estimates.

Brokerage firm Jefferies projects that leading wealth managers in India will achieve a 20-22% profit CAGR from FY24 to FY27, fueled by economic growth and the financialization of savings, particularly into capital markets. In the March quarter, the adjusted net profit of top AMCs, after accounting for extraordinary items, grew by an average of 62% year-on-year, supported by higher revenue and other incomes.

The strong growth of AMCs has made their stocks highly attractive. Kotak Equities notes that the sector is trading at a 55-60% premium to the broader market, thanks to strong cash flow generation, high transparency, predictability, and well-aligned incentives across investors, distributors, and asset managers. Goldman Sachs recently highlighted a trend of financialization of household savings, with allocations shifting from banks to non-banks. The AUM of retirement savings, insurance, and mutual funds in India has grown at a 15% CAGR over the past decade, outpacing the 9% growth in bank deposits during the same period.

Near-term risks and Long-term prospects:

While the long-term growth prospects remain compelling, some brokerage firms have noted potential near-term risks such as a possible reduction in the total expense ratio, adverse regulations, and yield compression. Nevertheless, brokerage firms believe that listed AMCs can achieve 15-20% revenue growth with relative ease over the next couple of years.

India’s top AMCs are experiencing strong revenue growth and market performance, driven by the financialization of savings and economic growth, positioning them for continued success in the coming years.

Ensuring a secure future for a daughter is every parent’s utmost priority. From education to marriage, every parent dreams of providing the best for their daughter. One crucial step in securing her future is to invest wisely in avenues that offer both security and growth. In India, there are various child investment plans tailored to meet this objective. Let’s explore the top 10 saving schemes for a girl child that every parent should consider:

Sukanya samriddhi yojana (SSY):

SSY is a government-backed scheme designed to encourage parents to save for their daughter’s future. With attractive features like a high-interest rate of 8% p.a. and tax benefits under Section 80C, SSY offers a secure and tax-efficient way to build a corpus for your daughter’s future.

Post office term deposit (POTD):

POTD is another reliable investment option available at post offices across the country. With a lock-in period of 5 years and competitive interest rates, POTD provides a safe haven for your investment while offering tax benefits under Section 80C.

Post office recurring deposit (PORD):

PORD is an excellent choice for parents looking for a disciplined way of saving for their daughter’s future. With a minimum monthly deposit of just Rs. 100, PORD offers flexibility and security, making it an ideal investment avenue for girl children.

National savings certificate (NSC):

NSC is a popular savings scheme known for its safety and guaranteed returns. With a tenure of 5 years and attractive interest rates, NSC provides a risk-free investment option for parents seeking to secure their daughter’s financial future.

Public provident fund (PPF):

PPF is not only a tax-saving instrument but also a long-term investment option for your daughter’s future. With a minimum tenure of 15 years and tax-free returns, PPF offers stability and growth potential, making it an ideal choice for parents planning for their daughter’s future needs.

Children gift mutual fund:

Designed specifically for accumulating a corpus for your daughter’s future, children’s gift mutual funds offer the dual benefits of equity and debt investments. With a lock-in period until your child turns 18, these funds provide an opportunity for long-term wealth creation.

Mutual funds via Systematic investment plan (SIP):

SIPs offer a disciplined approach to investing in mutual funds for your daughter’s future. With the flexibility to invest small amounts regularly and the potential for higher returns through rupee cost averaging, SIPs are an excellent choice for long-term wealth creation.

Gold ETFs:

Gold ETFs provide a convenient and cost-effective way to invest in gold for your daughter’s future. With the advantage of liquidity and no storage hassles, Gold ETFs offer a diversified investment option for parents seeking to secure their daughter’s financial future.

Unit linked insurance plans (ULIP):

ULIPs combine the benefits of insurance and investment, offering financial protection and wealth creation for your daughter’s future. With child ULIPs providing triple benefits, including continuity in investment in the absence of the parent, ULIPs are an attractive option for long-term financial planning.

Fixed deposit:

Fixed deposits are a traditional yet reliable investment option for securing your daughter’s future. With flexibility in terms of tenure and interest payout options, fixed deposits offer stability and assured returns, making them a preferred choice for risk-averse investors.

Securing your daughter’s future requires careful planning and prudent investment decisions. By opting for the right combination of investment plans mentioned above, you can build a robust corpus to fulfill your daughter’s aspirations. However, it’s essential to conduct thorough research and seek professional advice before making any investment decision.

Investing in your daughter’s future today will pave the way for a brighter tomorrow.