Month: March 2021

‘Retail segment is waiting to be mined’

Banking & Finance

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Vikramaditya Singh Khichi, executive director (ED), BoB

Bank of Baroda (BoB) expects to grow above industry levels in the next financial year. In an interview, Vikramaditya Singh Khichi, executive director (ED), BoB, highlights the reasons to Ankur Mishra for the bank’s stellar growth in the home loan segment. Excerpts:

What has been your strategy for retail loans amid Covid-19? Is there a deliberate move to focus more on retail loans?

Though the pandemic brought tough challenges, it also gave us the opportunity to make greater use of the digital mode to get leads and keep our focus intact. The retail loan segment is an important part of our growth story and it figures prominently in our overall strategy.

Do you believe the momentum in retail loans will be maintained? What is your outlook on growth in advances in the current financial year and the next one (FY22)?

Yes, we are optimistic about continuing growth in retail loans as the macro-economic indicators point at under penetration in this segment. For example, in home loans, the penetration level is just 10%. At Bank of Baroda, the retail loan book is growing at more than 13% on a year-on-year (y-o-y basis and in the home loan segment, by around 12% y-o-y, which are above industry levels.

Growth is expected to be robust in the next financial year, and we hope to continue growing at above industry levels. By when will the bank achieve double-digit growth in (overall) advances?

The bank is doing well in various retail loan products, viz housing loan, auto loan (around 22% y-o-y growth) and education loan (around 10% y-o-y growth), and is also growing higher than the industry in overall advances. We expect to maintain the same tempo in the future, even accelerate growth further.

How are you placed on disbursements and collections? Are these back to pre-Covid-19 levels?

We are almost at pre-Covid19 levels on disbursement and collection parameters.

You have achieved double-digit growth in the home loan segment. What strategy have you employed?

It is a result of good products, pricing and processes, the hallmark of our bank. We have access to high-quality borrowers through bureau scores and we are able to price our products very competitively. The repo rate changes made by the Reserve Bank of India (RBI) in the early part of the financial year provided existing home loan borrowers an option to shift their home loans from non-banking financial companies (NBFCs)/housing finance companies (HFCs). And this came as an opportunity for us to grow the home loan business. The launch of new specialised mortgage stores and product innovation also contributed to the growth we have achieved. The third quarter of this fiscal saw perceptible growth in new home sales across the metro cities, thanks to good offers from developers, some property price correction and interest rates being at an all-time low in the segment.

Do you think there could be a build-up of stress in the retail book? To what levels do you expect retail NPAs to rise? How do you plan to address the issue?

As we are already at the pre-Covid-19 level, we do not foresee any major increase in stress in the retail book. As I mentioned earlier, we are focused on quality growth. Around 73% of our borrowers have a bureau score above 725 and 84%, above 700. There is therefore no cause for undue concern as regards the stress levels.

How are you placed on provisioning?

The bank has made adequate provisions as of December 2020 (Q3 FY21), in conformity with regulatory guidelines as well as the Supreme Court (SC) order. The Provision Coverage Ratio (including Two) was above 85% in Q3FY21. The bank is setting aside 20% for substandard category assets, as against the regulatory requirement of 15%. We make appropriate provisions whenever the situation warrants.

Any plans to raise more capital this fiscal, given that you have already raised over `3,700 crore through tier-1 bonds?
The raising of capital depends on the bank’s requirements and the market scenario. In FY2020-21, we have raised a little over Rs 8,200 crore, which includes equity capital of Rs 4,500 crore through the qualitative institutional placement (QIP) route recently.

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Gold Price Corrects To Below Rs. 44000: Factors That Can Further Pull Down Gold Prices

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Investment

oi-Roshni Agarwal

|

Owing to the second wave of Covid 19 in the country and hence a threat to economic recovery, there is ample scope for the precious yellow metal to again hit fresh highs, there are some of the factors that may not support gold prices in the near to medium term. Here we will delve on the same, nonetheless as the bullion is expected to trade between Rs. 42000 to Rs. 60000 in this year, buying in dips is advised for investors.

Gold Price Corrects To Below Rs. 44000: Factors That Can Further Pull Down Gold

Gold Price Corrects To Below Rs. 44000: Factors That Can Further Pull Down Gold Prices

Risk Factors That Can Pull Down Gold Prices

1. Hike in real rates:

If there is positive news around economic progress and the US central bank begins to normalize its policy and move away from its accommodative stance then there shall be given a boost to the dollar. And rising dollar weighs on gold prices in a negative way, i.e. when dollar inches higher, gold prices move down.

2. Outflows from Gold ETFs:

Demand and supply also called as the market factors dictate pricing of a product, which is true for bullion as well. And as there have been reported continuing outflows from Gold ETFs, it will further put a pressure on gold prices.

3. Rising bond yields:

As the treasury and gold both are considered safe havens, there exist a positive correlation between gold and bond prices but gold and bond yields are inversely related i.e. when bond yields trend higher there is pressure on gold prices. So, is the case now as the US treasury yield drifted to its highest level of 1.74% for the first time since January 2020.

4. Increase in supply and non-matching demand:

Given the higher prices, recycling rates are rising for gold and at the same time, mining supply also is witnessing an increase as the Covid 19 led restrictions eased. And now if similar level of investment or physical demand for gold is not seen then excess supply would again put pressure on gold prices.

At the local jewellers gold of 22K is trading at a price of up to Rs. 43000 per 10 gm depending on your city and on the MCX gold for April delivery fell close to 2% today (March 29, 2021) to below Rs. 44000 at Rs. 43800 per 10 gm.

GoodReturns.in



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Banks want FinMin to pick up the tab for refund of interest on interest for loans above ₹2 cr

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Banks want the government to pick up the tab for refunding amounts already recovered from borrowers, including those with loans above ₹2 crore, as interest on interest/ compound interest/ penal interest for the six-monthpandemic-related moratorium period.

Supreme Court judgment

This comes in the wake of the Supreme Court’s March 23judgment in the Small Scale Industrial Manufactures Association versus Union of India and others case.

Bankers fear that if they have to foot the bill for the aforementioned refund, their bottomline will be impacted.

Hence, banks, under the aegis of the Indian Banks’ Association (IBA), are planning to request the finance ministry to enhance the scope of its October 2020 ‘Scheme for grant of ex-gratia payment of difference between compound interest and simple interest for six months to borrowers in specified loan accounts (March 1, 2020, to August 31, 2020)’ to cover even loans above ₹2 crore.

What this means is that banks want the government to shoulder the burden of the refund, estimated at about ₹7,000 crore to ₹7,500 crore.

As per the SC judgment: “There shall not be any charge of interest on interest/ compound interest/ penal interest for the period during the moratorium and any amount already recovered under the same head, namely interest on interest/ penal interest/ compound interest shall be refunded to the concerned borrowers and to be given credit/ adjusted in the next instalment of the loan account.”

Anil Gupta, Vice-President – Financial Sector Ratings, ICRA, noted that the government had already announced relief for borrowers having borrowings up to ₹2 crore, which was estimated to cost about ₹6,500 crore to the exchequer.

With announcement of waiver for all borrowers, he assessed that the additional relief of about ₹7,000-7,500 crore will need to be provided to borrowers.

Ex-gratia payment under the October 2020 Scheme covered borrowers having sanctioned limits and outstanding amount of up to ₹2 crore (aggregate of all facilities with lending institutions) as on February 29, 2020. The main condition to receive this payment was that the loan account should have been standard as on this date.

Categories of loans covered

Eight categories of loans – micro, small and medium enterprise, education, housing, consumer durables, credit card dues, automobile, personal loans to professionals and consumption loans – were covered by the scheme.

Policy analyst Hari Hara Mishra observed that the additional interest burden on banks for extending (refund of interest on interest/ compound interest/ penal interest) coverage to all eligible loans during the moratarium period should be dealt with as a relief measure during disaster management.

He emphasised that this burden should be borne by the government, as banks will have continued compounded liability to service the interest to depositors during the corresponding period.

Banking expert V Viswanathan cautioned that: “If banks pick up the tab, it will be cited as a precedent, which can be invoked later on by any borrower.

“That is why the ex-gratia scheme was implemented (for loans up to ₹2 crore) by the government so that this will not be quoted as a precedent against banks.”

He felt that if the government does not extend the ex-gratia payment to loans above ₹2 crore, private banks may file a review petition in the SC.

Meanwhile, the Indian Banks’ Association has advised banks that the moratorium period (March 1, 2020, to August 31, 2020) should be excluded for reckoning the number of days for deciding the non-performing asset (NPA) status under prudential norms. This is regardless of whether moratorium was requested for or not by the borrower.

Referring to the aforementioned advisory, Viswanathan said: “Suppose you have not exercised moratorium on February 29, 2020, and paid six installments during the moratorium period.

“Subsequently, if your ability to service the loan has been undermined, banks can consider these six installments as advanced installments from September 2020 till February 2021, thereby avoiding classification as NPA.” Moreover, borrowers credit rating will remain intact.

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2 Special FD Schemes For Senior Citizens Which They Can Avail Before June

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SBI Special FD Scheme For Senior Citizens

The interest rate on SBI’s special FD scheme for senior citizens will be 80 basis points (bps) higher than the regular customers. SBI presently provides a 5.4 percent interest rate on five-year fixed deposits to the general public. The interest rate applied to a fixed deposit made by a senior citizen under the special FD scheme is 6.20 percent. Below are the current fixed interest rates for senior citizens of SBI which are in effect from January 2021.

Tenure ROI in % for senior citizens for below Rs 2 Cr
7 days – 45 days 3.4
46 days – 179 days 4.4
180 days – 210 days 4.9
211 days – 364 days 4.9
1 year – 1 year 364 days 5.4
2 years – 2 years 364 days 5.6
3 years – 4 years 364 days 5.8
5 years – 10 years 6.2

HDFC Bank Special FD Scheme For Senior Citizens

HDFC Bank Special FD Scheme For Senior Citizens

Under its special FD scheme HDFC Bank offers 75 basis points (bps) higher interest rates compared to the general public. If a senior citizen holds a fixed deposit with HDFC Bank Senior Citizen Care FD, the interest rate will be 6.25 percent. The interest rate on an FD booked under the HDFC Bank Senior Citizen Care FD scheme that is prematurely closed (including a sweep in/partial closure) after 5 years will be 1.25 percent lower than the contracted rate or the base rate available for the period the deposit has maintained with the bank, whichever is lower. Below are the current fixed interest rates for senior citizens of HDFC Bank which are in effect from November 13, 2020.

Tenure ROI in % for senior citizens for below Rs 2 Cr
7 – 14 days 3
15 – 29 days 3
30 – 45 days 3.5
46 – 60 days 3.5
61 – 90 days 3.5
91 days – 6 months 4
6 months 1 days – 9 months 4.9
9 months 1 day < 1 Year 4.9
1 Year 5.4
1 year 1 day – 2 years 5.4
2 years 1 day – 3 years 5.65
3 year 1 day- 5 years 5.8
5 years 1 day – 10 years 6.25

Note

Note

Several banks, including ICICI and Bank of Baroda (BOB), also had introduced special FD schemes last year at the midst of the pandemic to offer a meritorious alternative to senior citizens at a time when interest rates were declining. ICICI Bank provides a separate FD scheme for senior citizens entitled ‘ICICI Bank Golden Years’. The bank offers an 80 basis point higher interest rate on these deposits. The ICICI Bank Golden Years FD scheme offers senior citizens a 6.30 percent annual interest rate. These rates are in effect from 21 October 2020. On the other side, senior citizens will get a 100 basis point higher rate compared to the regular citizens on these deposits of Bank of Baroda. The interest rate on fixed deposits made under the special FD scheme (for a term of more than 5 years and up to 10 years) will be 6.25 percent. These rates are effective from 16 November 2020. It is important to remember you as a senior citizen is that both the special FD scheme of ICICI and BOB will end on March 31, 2021.



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Global banks warn of possible losses from hedge fund default

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Credit Suisse didn’t identify the ‘significant’ hedge fund or the other banks affected, or give other details of what happened. (Representative Image)

Swiss bank Credit Suisse said Monday it may have suffered a “highly significant” loss from a default by a US-based hedge fund on margin calls that it and other banks made last week, while Japan’s Nomura said it could face a loss of USD 2 billion due to an event with a US client.

Credit Suisse didn’t identify the “significant” hedge fund or the other banks affected, or give other details of what happened. News reports identified the hedge fund as New York-based Archegos Capital Management. “Following the failure of the fund to meet these margin commitments, Credit Suisse and a number of other banks are in the process of exiting these positions,” the company said.

The Financial Times reported that Archegos had large exposures to ViacomCBS and several Chinese technology stocks and was hit hard after shares of the US media group fell last week. A margin call is triggered when investors borrow using their stock portfolio as collateral and have to make up the balance required by banks when the share prices fall and the collateral is worthless.

Credit Suisse said that “while at this time it is premature to quantify the exact size of the loss resulting from this exit, it could be highly significant and material to our first-quarter results, notwithstanding the positive trends announced in our trading statement earlier this month.” Credit Suisse said that it plans to issue an update “in due course.”

Nomura said that on Friday “an event occurred” that could subject one of its US subsidiaries to a loss of USD 2 billion based on market prices on Friday. It didn’t identify the client. The bank said, “there will be no issues related to the operations or financial soundness” of Nomura or its US subsidiary.

The Archegos website was not immediately available.

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Here’s Why Customers Of SBI, HDFC, & ICICI Bank May Face Issue In Receiving OTP

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Planning

oi-Vipul Das

|

If you have an account with HDFC, SBI, or ICICI Bank, you may encounter difficulties receiving OTP in the upcoming days. Those hoping to visit the banks in the coming week, however, should be informed that the banks will be closed for 5 days from March 30 to April 4. The Telecom Regulatory Authority of India (TRAI) issued the names of 40 companies on Friday that failed to comply with the latest SMS rules, including three banks: SBI, HDFC, Kotak and ICICI. The TRAI issued a declaration in which they issued a stern rule, specifying that these companies must comply with the directives by April 1, 2021, or their customers will be unable to get or receive OTP on their registered mobile number or email ID with the bank.

Here’s Why Customers Of SBI, HDFC, & ICICI Bank May Face Issue In Receiving OTP

The Telecom Regulatory Authority of India (TRAI) has launched a mechanism to reduce unauthorized and illegitimate SMS by asking companies to lodge SMS in a format with TRAI in order to satisfy customers. The primary objective of this initiative is to deliver the appropriate message to customers to prevent them from being victims of cybercrime. Many companies, on the other hand, are not taking TRAI’s order effectively, and their customers may end up bearing the bulk of the consequences in the coming month. According to the latest statement TRAI stated that “It has been informed that principle entities including major banks like State Bank of India, HDFC Bank, Punjab National Bank, Axis Bank Ltd are not transmitting mandatory parameter like content template IDs, PE (principle entity) IDs, etc. even in those cases where content templates have been registered while sending such messages to TSPs (telecom service providers) for delivery.”

As a result of the companies’ failure to obey its directives, TRAI has taken stern action against them. The authority has warned all of these defaulting firms that if they don’t want their customers to face trouble receiving OTP, they must comply with the order by April 1, 2021. As a consequence, from April 1, 2021, any message that fails the ‘Scrubbing Process’ since it does not satisfy regulatory criteria will be excluded from the regulatory regime. The new SMS system is yet to be adopted by 17 private and public sector banks including Life Insurance Corporation of India (LIC). Other companies listed as defaulters by Trai include Flipkart, non-banking financial companies (NBFCs) Bajaj Finance Ltd and Indiabulls Consumer Finance Ltd, brokerage companies Kotak Securities Ltd and Angel Broking Ltd, and the National Stock Exchange (NSE).

All regulatory bodies, including the Reserve Bank of India, the Securities and Exchange Board of India, the Insurance Regulatory Development Authority, and state and central government authorities, have been directed by TRAI to ensure that the rules are followed by bodies within their regulation. TRAI also stated that “It appears that few entities are not only indifferent but are not serious enough in complying with the provisions of the regulations, thereby, causing inconvenience to the consumer. In the absence of these necessary parameters, the messages are bound to be rejected by the system during the scrubbing process”. The Telecom Commercial Communication Customer Preference Regulations (TCCCPR), that prevent unregistered companies from issuing commercial messages, were implemented in July 2018 to properly deal with the menace of spam. Fraudulent messages to customers are often prohibited for registered businesses. Following significant glitches in online transactions like net banking, Aadhaar-enabled transactions, train ticket bookings, and vaccine registration, TRAI restored the latest SMS scrubbing rules last week.

Bank Holidays From March 30 to April 4

It should be noted that bank services in Patna will be closed on March 30. Following this, banks will be closed on March 31st, which is the last day of the fiscal year. Following these, banks will be closed on April 1 because account closures will be concluded on that day. On April 2, there will also be a holiday due to Good Friday. The banks will be closed on April 4th due to the fact that it is a Sunday.



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Check The New TDS Rules For PPF And Other Small Savings Schemes

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Investment

oi-Vipul Das

|

Where an investor withdraws more than Rs 20 lakh from all post office schemes including PPF, the Department of Post has released new guidelines for deducting tax deducted at source (TDS). TDS will be withheld from the withdrawal balance if an investor has not filed income tax returns (ITR) for the previous three assessment years, as per the latest provisions of Section 194N of the Income Tax Act 1961. This latest statute is in effect from July 1, 2020. Know all about the new TDS standards below:

Check The New TDS Rules For PPF And Other Small Savings Schemes

Know All About New TDS Rules

  • If an investor’s overall cash withdrawals during a financial year cross Rs 20 lakh but do not exceed Rs 1 crore, and he is a non-ITR filer, TDS of 2% will be withheld from the amount surpassing Rs 20 lakh. If the gross cash withdrawal from all post office accounts in a financial year crosses Rs 1 crore, TDS of 5% will be levied on the amount in excess of Rs 1 crore.
  • If you file an ITR, though, the rules are specific Where an ITR filer’s cash withdrawal in a financial year crosses Rs 1 crore. The amount above Rs 1 crore will be subject to a 2% of income tax.
  • These updates are yet to be introduced. The Center for Excellence in Postal Technology (CEPT), a technology service partner for post offices, has reported and collected the specifics of such depositors for the term 1 April 2020 to 31 December 2020 in order to make it easier for Post Offices to deduct TDS.
  • The necessary details will be forwarded to the Circle/CBS CPCs by CEPT. The CEPT will provide specifics such as the account number, account holder’s PAN number, and the amount of TDS to be deducted.
  • The circle’s incharge, CPC(CBS), shall forward the specifics to the relevant Post Office and allow TDS deduction from such customers/accounts effectively without failure.
  • TDS will be deducted at the depositor’s Post Office, and the account holder will be notified in writing of the deduction.
  • The responsible Postmaster will organise and approve a voucher for the TDS amount, which will then be forwarded to HO/SBCO with other SB vouchers.
  • Since it is a legal necessity, the responsible postmaster is solely responsible for deduction of TDS in conformity with the act.
  • Non-deduction of TDS may result in penalty or recovery respectively.

Note

It’s worth remembering that some tax-saving initiatives require a minimum contribution per fiscal year in order for the account to remain operational. Public Provident Fund (PPF), National Pension System (NPS), and Sukanya Samriddhi Yojana (SSY) are some of the small saving schemes of post office that require a minimum deposit per fiscal year. Please, bear in mind that starting in FY 2020-21, a taxpayer can proceed to use the old/current tax regime and take advantage of current tax deductions. Alternatively, you can choose the new, more favourable tax regime, which excludes all existing tax breaks and deductions. It’s worth remembering that even though you choose the current tax regime, you must make a minimum contribution to keep your account operational. To know how much you need to make a minimum contribution towards your PPF, NPS and SSY account are as follows:

Public Provident Fund (PPF)

In a fiscal year, the minimum annual contribution to a PPF account is Rs 500. The deadline to make a contribution for this fiscal year is March 31, 2021, following which you will be charged a penalty of Rs 50 every year as well as a Rs 500 arrear subscription fee for each year in case you miss to make the minimum contribution. The account would be considered as inactive if the minimum contribution is not made during the financial year. In all of these scenarios, the PPF account holder will be unable to seek a loan or make partial withdrawals until the account is reactivated. Before the initial maturity date, a terminated account can be reactivated. It can’t be revived after it reaches maturity, and it can’t be closed until it reaches maturity.

National Pension System (NPS)

It is required to make a minimum contribution to a Tier-I NPS account per fiscal year if you have opened one. NPS tier-I allows a minimum contribution of Rs 1,000 in a financial year to keep the account functioning, according to existing regulations. If you fail to make the minimum contribution towards your NPS Tier-I account, it will become inactive. To reactivate your NPS account, you will be required to pay a penalty of Rs 100 per year, as well as make minimum contributions per year. For reactivating the NPS account, Point-of-Presence (POP) charges will be applied. Even though Tier II has no minimum contribution requirements, if the Tier I account is frozen, the Tier II account will be frozen as well if any.

Sukanya Samriddhi Yojana (SSY)

A minimum deposit of Rs 250 is required per financial year to keep the Sukanya Samriddhi Account active. The account would be considered as an inactive or frozen account if the minimum contribution is not made in a fiscal year. A dormant account can be reactivated before the 15-year period expires from the date it was opened. You will be required to make a minimum deposit of Rs 250, as well as a penalty of Rs 50 for each defaulted year, to get the account reactivated.



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New Wage Code: Why Your Take-Home Salary May Decrease?

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Basic Pay

The new wage code stipulates that minimum wages must account for half of an employee’s CTC. Employee benefits such as leave travel, house rent, overtime, and transportation would have to be reduced to the remaining 50% of CTC. According to the new regulations, the allowance portion of the total salary or compensation cannot exceed 50% of the total salary or compensation, which means that the basic salary must be 50%.

If a person’s salary is Rs. 1 lakh and the new minimum wage is Rs. 40,000, the employee and employer can each contribute Rs. 4,800 to PF at a rate of 12%. In this case, the in-hand salary will be &dollar;90,400.

However, if the basic wage is raised to Rs 50,000 after agreeing with the Current Wage Code’s concept, the take-home pay will fall to Rs 88,000, a decrease of Rs 2,400.

Provident Fund

Provident Fund

In situations where the employer contributes to PF on the actual basic salary rather than the minimum required contribution of 12% of Rs 15,000, the adjustment in basic pay would result in a change in PF contribution.

Previously, the Provident Fund was measured based on an employee’s basic salary, taking into account the dearness allowance and other benefits provided by the company. The employer and employee contributions will now be based on half of the CTC. Your PF contribution will go up, but your take-home pay will go down.

Gratuity

Gratuity

Gratuity would also adjust as a result of the updated wage code. Gratuity would have to be measured on a broader scale, taking into account all standard wages and other salary deductions such as travel, special allowance, and so on. This will increase the cost of gratuities for businesses. Gratuity is the amount of money accrued to you at the completion of a final and permanent work term. Even after a year of service, the employee is entitled to a gratuity.

Impact on Taxes

Impact on Taxes

Those in a higher salary bracket would pay more tax because the tax planning option is limited to 50% of cost-to-company (CTC), while those in a lower bracket would be protected by higher retirement contributions and lower taxes.

As PF contributions increase, one might be able to demand a larger deduction. Increased statutory contributions, such as PF, which result in a reduction in tax liability, subject to the overall limit of Rs 1.5 lakh set by Section 80C.

In these turbulent times, the new pay code seeks to provide workers with stability and assurance. The government needed to ensure that millions of workers’ retirement plans were safe. As a result, the new pay code was announced.

When the company restructures after compensation provisions, it will be wise to consult a professional to understand the pay structure and plan your investments accordingly.



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Credit Suisse says it faces a ‘significant loss’

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Swiss bank Credit Suisse said Monday that it may face a “highly significant” loss resulting from a default by a US-based hedge fund on margin calls that it and other banks made last week.

In a brief statement, Credit Suisse didn’t identify the “significant” hedge fund or the other banks affected, or give other details of what happened.

“Following the failure of the fund to meet these margin commitments, Credit Suisse and a number of other banks are in the process of exiting these positions,” the company said.

“While at this time it is premature to quantify the exact size of the loss resulting from this exit, it could be highly significant and material to our first-quarter results, notwithstanding the positive trends announced in our trading statement earlier this month,” it added. Credit Suisse said that it plans to issue an update “in due course.” A margin call is triggered when investors borrow using their stock portfolio as collateral and have to make up the balance required by banks when the share prices fall and the collateral is worth less.

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Past 1-Year Returns From Focused Equity Funds Are Up To 95%? Should You Invest?

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1-Year Returns from Focused mutual funds have been encouraging

In the past 1-year after the stock markets have gained substantially to record high, focused mutual funds with investments into varied stocks have also yielded returns to the tune of 75-100%. In comparison during the same period, Sensex has surged by 67% (taking into consideration Sensex opening levels as on March 30, 20200.

5 Top performing Focused funds in the last one year

1. Nippon India Focused Equity Fund: 1-year annualized return from the fund has been 96.73%. Fund size is substantial of Rs.4990 crore. And of the total 90.52% corpus into Indian stocks, 55.67% is into large cap stocks, 11.76% is in mid cap stocks, 8.95% in small cap stocks.

Focused fund 1-year return 3-year return 5-year return
Nippon India Focused Equity Fund 96.73% 11.65% 15.88%

2. Mirae Asset Focused Fund-Regular Plan:

2. Mirae Asset Focused Fund-Regular Plan:

With a fund size of Rs. 5179 crore and expense ratio of 1.94%, Mirae Asset Focused Fund has provided 1-year annualized return of 82.34%. NAV of the fund as on March 26, 2021 was 15.528. This fund has 98% invested into Indian stocks with 46% in large-cap stocks and the remaining 25% and 11% in mid-cap and small cap stocks, respectively.

Focused fund 1-year return 3-year return 5-year return
Mirae Asset Focused Fund-Regular Plan 82.34% NA NA

3. Franklin India Focused Equity Fund:

3. Franklin India Focused Equity Fund:

Fund size of this Franklin AMC is Rs. 8028 crore and it holds CRISIL 2-star rating. 93% of the entire corpus is into stocks with 67% in large-cap, 9% in mid-cap and 12% into small cap.

Focused fund 1-year return 3-year return 5-year return
Franklin India Focused Equity Fund 80.34% 11.27% 13.64%

4.ICICI Prudential Focused Equity Fund:

4.ICICI Prudential Focused Equity Fund:

This is a 3-star CRISIL rated fund with 95% investment in Indian stocks of which 75.87% is in large cap stocks, 8.88% is in mid cap stocks, 6.81% in small cap stocks.

Focused fund 1-year return 3-year return 5-year return
ICICI Prudential Focused Equity Fund 77.48% 12.82% 14.00%

5. IIFL Focused Equity Fund-Regular Plan:

5. IIFL Focused Equity Fund-Regular Plan:

This fund from IIFL Mutual fund is a 5-star rated CRISIL fund and out of the total 98% investment into stocks, over 60% is into large-caps.

Focused fund 1-year return 3-year return 5-year return
IIFL Focused Equity Fund-Regular Plan 73.54% 19.56% 18.25%

So, with majority of the corpus put into large caps, the focused fund helps to provide higher alpha driven by mid and small cap stocks, while the downside risk in the fund is protected with the help of large-cap holdings.

Note the return for the different funds are taken from moneycontrol website as on March 29,2021

Should You Invest In Focused Equity Mutual Funds?

Should You Invest In Focused Equity Mutual Funds?

In the past one year, the returns in the equity fund space has been propelled by substantial gains in equity from the lows induced by Covid 19 and in the long term, these focused funds or a focused approach in the portfolio may or may not work in all market conditions. So, a better suggestion as per experts is to look at diversified equity funds that have managed to deliver across market cycles.

Further as suggested by the different focused funds, the risk in them is moderately high, higher than even diversified funds, so for you to be investing in focused equity funds, you should have a significantly higher risk appetite, as any wrong bet could yield significant losses for you.

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