Category: Personal Finance

ELSS Funds

A three-year lock-in is required for ELSS or tax-saving funds. With a lump-sum payment, your investment is unlocked all at once three years after purchase. For example, if you deposit Rs. 1.5 lakh in an ELSS on March 31, 2019, your money will be invested until March 31, 2022. You can either sell all of your units or keep them. Your investments in a SIP, on the other hand, will mature one by one, every month, beginning March 31, 2022. Only by March 31, 2023, will all of your investments be unlocked.

Individuals benefit from both one-time investments and SIPs for mutual fund programs. SIPs provide lower overall returns in consideration of the investor’s ability to make regular nominal investments. The rate of return is lower than it would be on a one-time investment.

Benefits of SIP

Financial Discipline

A monthly SIP in an ELSS fund ensures that you invest a portion of your earnings while avoiding paying taxes. As a result, it instills the habit of frequent investment and ensures that your money works for you.

Cost averaging

Because ELSS is an equity investment, it is highly volatile in the near term. If you wait until the end of the year, you may wind up investing a large chunk of money at a time when the markets are at their peak. Investing in a monthly SIP ensures that you invest at regular intervals, regardless of market conditions. This aids in the cost averaging process over time.

Cash flow

If you wait until the end of the year to plan your taxes, you could wind up having to make a one-time investment of Rs.1,50,000. However, with a SIP, it’s far easier to invest Rs.12,500 per month and earn Rs.1,50,000 over the course of the year.

As a result, SIP is an excellent tool for paid folks who are experiencing cash flow issues.

Benefits of Lumpsum Investment over SIP

Ideal For Business Persons

Individuals who are self-employed, as well as investors who do not have a consistent source of income, should consider investing in lump sum quantities. SIPs demand a predetermined amount to be deposited on a regular basis; investors who rely on seasonal revenues may struggle to keep up with the payments of a structured investment plan.

Tax Benefits

Making a lump-sum investment at the beginning of the financial year might enable an investor to receive significant tax benefits under Section 80C of the Income Tax Act, up to Rs. 1.5 lakh from total taxable income, which can be lodged with the Income Tax return. It also provides for higher returns on long-term ELSS investments.

Lumpsum Or SIP In ELSS?

The main distinction between the two approaches is the degree of risk involved. Because you’re just investing a portion of your overall investment, SIPs provide better capital protection. If you’re a seasoned investor, we encourage lump-sum investing.

If you’re a first-time investor, a SIP is a great way to get into the habit of investing. When you invest a huge sum of money, you must invest at the correct time. Starting SIPs does not necessitate market timing.

SIPs and lumpsum investments have differing lock-in periods; SIPs typically have a 3-year lock-in period that matures in stages, but lumpsum investments are unlocked all at once after 3 years.

For example, if you invest in an ELSS with a lumpsum deposit, your investment would mature all at once after 3 years, whereas SIP bonds will mature one by one (depending on the months of investment) once the 3-year period has passed.

For example, if an investor invests their entire cash in a three-year investment plan on September 1, 2019, all of the units would mature on September 1, 2022, and can be withdrawn at any time after that.

The situation will be different if you invest through a SIP. Every month, beginning on September 1, 2019, 1st October 2019, 1st November 2019, and so on, an investor deposits amount. The units purchased on September 1, 2019, will mature on September 1, 2022, 1st October 2019 will mature on 1st October 2022, and so on.

The situation will be different September 1, 2019.

Conclusion

The rules for investing in Mutual Fund schemes via Systematic Investment Plan or lumpsum payment are outlined. As an investor, you should examine your return expectations carefully before investing in either of the choices.

Choosing ELSS will allow you to take advantage of Section 80C tax benefits to the fullest extent possible. If you are investing at the end of a financial year or if you have a higher risk appetite, Lumpsum investments will be a better fit. SIPs, on the other hand, are excellent if you wish to avoid risks and have a consistent source of income.

Buy SBI for a price target of Rs 600

The brokerage sees an upside of 40% on the stock of SBI with a price target of Rs 600, as against the current market price of Rs 431.

According to the brokerage the balance Sheet cleansing is largely over and strong asset quality outlook remains.

“State Bank of India’s focus on strengthening its Balance Sheet has enabled a sharp decline in gross non performing assets to Rs 1.3 trillion in FY21 from Rs 2.2 trillion in FY18. Gross non performing assets declined by 43% over the past three years, while PCR increased to 68% at present (85% PCR on the corporate book) from 40% four years back,” the brokerage has said.

Improvement in asset quality

According to Motilal Oswal, State Bank of India has cumulatively written off Rs 1.5 trillion since FY18.

“The improvement in asset quality has been sharper than most peers, including Private Banks. While 1QFY22 saw a marginal increase, we believe that the Balance Sheet cleansing is largely complete, with the focus shifting to earnings recovery and pursuing growth. Controlled restructuring (0.8%) and SMA book (0.5%) provides a further comfort on asset quality and will drive a sustained reduction in credit cost,” the brokerage has said.

The elephant is set to dance

According to Motilal Oswal, the elephant is set to dance with RoE to improve to 15%. “State Bank of India earnings in FY21 have been more than the sum of what it did in the preceding five years (FY16-20). Its FY22E earnings will be close to the sum of the past six years (FY16-21). It appears well positioned to report strong uptick in earnings, led by normalization in credit cost. This, along with expected uptick in core operating performance, will further propel earnings growth. We estimate PPOP at 14% CAGR over FY21-23E v/s 6% CAGR (FY18-21), enabling State Bank of India to achieve 15% RoE (decadal high) by FY23,” the brokerage has said.

SBI valuations

According to Motilal Oswal, mong PSU Banks, State Bank of India remains the best play on a gradual recovery in the Indian economy, with a healthy PCR, Tier I of 11.3%, strong liability franchise and improved core operating profit.

“While business trends were impacted by the lockdowns, loan growth is likely to recover gradually over FY22-23E. Even slippages are expected to moderate meaningfully over 2HFY22 as asset quality remains impeccable in the Retail book. We estimate credit costs of 1.6%/1.3% for FY22E/FY23E. We project RoA/RoE of 0.8%/14.6% by FY23E. Subsidiaries (SBI Mutual Fund, SBI Life, SBI Card, SBI Cap) have exhibited robust performances over last few years, supporting our SoTP valuation. Maintain BUY, with a target price of Rs 600 per share (1.3x FY23E ABV + Rs 190 /share from subsidiaries,” the broking firm has said.

Disclaimer

The article is informational in nature, which is taken from the brokerage report of Motilal Oswal. Please do consult a professional advisor before you invest in equities. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and authors do not accept culpability for losses and/or damages arising based on information in the article.

Buy Axis Bank for a price target of Rs 940

Sharekhan has set a price target of Rs 940 on the stock of Asix Bank as the bank eyes a calibrated retail-led growth driven by low-cost deposits and a strong capital base.

“Axis Bank highlighted on its business strategy, in terms of growth and profitability. The bank wants to broaden its low-cost deposit franchise and thereby grow the deposit base in line with its loan book. Retail assets would remain a key growth driver. Moreover, it also plans to scale up and accelerate growth in the wholesale banking business. Its strategy going forward is to build a ‘digital bank’ and be a leader in the digital payments space,” the brokerage has said.

Axis Bank: Retail loans to drive growth

According to Sharekhan, the management indicated that it would focus on deposit-led loan growth, especially retail loans that form 54% of its total loan book. “Axis Bank’s loan book clocked a 13% CAGR during FY16-FY21. In Q1FY22, it expanded its loan book cautiously by 9.5% y-o-y. Of this, retail loans grew by 14% y-o-y and corporate loans also rose at 8% y-o-y in Q1. About 88% of its loan book is secured lending. Axis Bank’s emphasis continues to be on borrowers which have a relationship with the bank,” the brokerage has said.

Valuations of Axis Bank

According to Sharekhan, Axis Bank trades at 2.1x/1.8x/1.6x FY2022E/FY2023E/FY2024E ABVPS and we believe valuations are reasonable and there is potential for re-rating as earnings pick up and the economic scenario normalises.

“Conservative provisioning, strong capital base, overall franchise value and a high provision coverage ratio (PCR) are positives, which will help the bank ride over medium-term challenges and support growth and valuations. We maintain a Buy rating on the stock with a revised price target of Rs. 940,” the brokerage has said.

Preferred picks from the banking space: ICICI Bank, SBI and HDFC Bank

The brokerage has also highlighted other banks that are its preferred picks including, ICICI Bank, SBI and HDFC Bank, in its recent Q1FY2022 Results Review.

“Banks saw high slippages in Q1, especially in retail, agriculture or MSME due to the second wave of Covid-19. NII growth was weak and NIMs were under pressure due to sluggish disbursement and muted loan growth,” the brokerage has said.

“Second wave of covid-19 also impacted asset quality of NBFCs and led to loan degrowth. Performance of home finance remained resilient as Govt.’s efforts for affordable housing bode well for the sector,” the brokerage has said.

Disclaimer

The article is informational in nature, which is taken from the brokerage report of Sharekhan. Please do consult a professional advisor vefore you invest in equities. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and authors do not accept culpability for losses and/or damages arising based on information in the article.

Capital float

To facilitate risk assessment and marketing, Capital Float combines AI technologies with human expertise. AI and machine learning algorithms assist the company in determining the creditworthiness of applicants, allowing them to select the appropriate form of loan for the individual. Capital Float also used AI models in its marketing campaigns to better target clients. In 2018, they bought Walnut, a popular personal finance management app, which pushed them even deeper into the credit-solutions business. They currently offer personal financing (via Walnut), business finance (including short-term loans for small enterprises), and their Buy Now Pay Later platform.

For things like risk assessment, marketing, and collections, Capital Float combines cutting-edge AI tools with skilled human expertise. Capital Float uses artificial intelligence and machine learning to assess applicants’ creditworthiness and identify the best time to provide them a loan. For better client targeting, they’ve also included intelligent AI models into their marketing initiatives.

CreditMate

CreditMate is a debt collection tool that helps lenders collect late payments from debtors. To make its procedures more effective, the software uses AI and machine learning. The company launched its ‘Sherlock’ product in 2019, which employs a machine learning system to rate debt defaulters and handle debt resolution operations efficiently. By meeting the aforementioned needs, Creditmate focuses on offering technology for a better and more effective onboarding of new consumers.

The financial industry is full of highly decision-driven procedures, such as making calls to the correct person at the right time, settling problems, and determining what causes clients to become irritated, and so on. Such processes are currently carried out by millions of human agents. This expertise is gradually being converted into cutting-edge artificial intelligence systems with the support of Fintech companies such as Creditmate.

Lendingkart

It was founded in 2014 to provide enterprises with quick access to working capital financing solutions. The firm use technology to assess creditworthiness in a timely and efficient manner. It is a non-deposit-taking NBFC that lends to small businesses in India. In addition, LenkinKart aims to assist small businesses by making loans more accessible to them. The company analyses data points from many sources in order to maintain track of small businesses’ creditworthiness and accurately operate it.

When it comes to marketing, AI assists them in determining how well their marketing initiatives and campaigns are doing and which ones are yielding better results, allowing them to better allocate their budget across various channels.

Mswipe

In its Field Force Automation App, Mswipe makes use of artificial intelligence (F2A2). Signzy, a Bengaluru-based firm, has developed F2A2, a technologically sophisticated merchant onboarding solution.

The capacity of Mswipe’s F2A2 Asia technology to digitally record KYC papers and merchant profile information, as well as instantly authenticate them using over 40 government databases, makes it the most unique solution in the region. The onboarding period for new merchants has been cut in half thanks to this cutting-edge technology.

CogNext

It is one of the fastest-growing fintech startups, having built the industry’s first no-code regulatory compliance platform since its inception in 2019. It involves simplifying and automating regulatory compliance in order to make it cost-effective for financial institutions, thanks to technologies like AI and ML. It also offers powerful solutions for managing and scaling up the credit business of various financial institutions, using NLP, Deep Learning, and Predictive Analytics.

It operates on a subscription-based business model, with clients such as banks, financial institutions, non-banking finance firms, and neo banks paying an annual subscription fee.

Platform X, a CogNext automated technology platform, delivers regulatory compliance solutions that are “nimble, flexible, interactive, scalable, and cost effective.” Financial institutions can use such technologies to better regulate the risks they take and increase their integrity and transparency. Project X is based on a technology foundation that makes it simple to process client data and calculations.

RazorPay

With its range of solutions, Razorpay is India’s sole payments solution that allows businesses to accept, process, and disburse payments. Third watch, an AI-powered technology, helps e-commerce businesses avoid Return-to-Origin (RTO) fraud losses. Customers commit RTO fraud when they return a product by either switching it for a damaged one or denying that they ever got it in the first place.

It is an Indian payment service that assists businesses in receiving, processing, and disbursing payments through its products. JioMoney, Mobikwik, Airtel Money, FreeCharge, Ola Money, and PayZapp are just a few of the payment options available with Razorpay. It also supports credit cards, debit cards, net banking, UPI, and other popular wallets. From a single platform, it manages the marketplace, simplifies money transactions, collects regular fees, swaps client invoices, and accesses working capital loans.