IndiaP2P Blog

Responsible content on personal finance & economics that makes you smarter about money.

4 Trends Retail Investors should not miss and, the impact of RBI's recent repo rate hike on your investments.

May-07-2022


Blog Image

Here are some noteworthy retail investing trends and developments.

 

1. Climate & Sustainability Investments

Alarming climate change data, consumer consciousness, and a combination of pressure + incentives from regulators have led to private and public investments in the growing and very important sector, broadly categorized as ESG investing.

AUM for sustainable investments grew 4.7times over last year in India given the increased demand for climate action and overall sustainable investing given the impact of Covid19. Compared to global AUM, we still have much to do.

 

Some notable sub-sectors include electric vehicles (EVs) and carbon credits generation businesses. While the move towards EVs seems like an established trend, the surge in demand for carbon credits or carbon offsets has led to a variety of investor types investing in carbon offset generation projects and companies.

 

sustainable investment products SDG

 

2. Fixed-Income Fixation

With volatility in the equity markets and tumultuous world events, interest in fixed-income investments has shot up with many tech-enabled options emerging for retail investors. 

You can now invest in fractionalized, diverse loans with IndiaP2P earning up to 18% p.a., invest in bonds starting at INR 20,000 investments and even explore crypto-based fixed-income products that make returns by lending your money/crypto to projects seeking credit.

Fixed Income Investment Products

 

 

3. New Developments in Mutual Funds

India has over 2000 mutual fund schemes for just about as many listed companies, this makes choosing between schemes and funds a very difficult task.

The Association of Mutual Funds in India AMFI has made it easier for retail investors to choose between and understand a mutual fund’s performance.

Basis directives from SEBI, AMFI has specified indices against which the performance of various mutual funds should be compared. This is to make it easier for retail investors to evaluate how their investments are performing and choose which funds to invest in.

 

The performance of a mutual fund is usually measured via two metrics called alpha and beta.

Let’s start with alpha: Alpha measures how well or badly the fund did in comparison with an index. Remember that mutual funds are thematic - can be a sector, size of companies etc. To estimate alpha we need to know the closest index, let’s say for a fund that invests in large companies, BSE100 index may be appropriate.

What fund managers aim to achieve is a positive alpha i.e.deliver greater returns than the index however, negative alphas are also a reality. AMFI in its guidelines has very nicely defined these comparison indices which can be viewed here.

 

On the other hand, beta, is about volatility i.e. the ups and downs in prices and hence your earnings. If your mutual fund is more volatile than the comparative index it has a high beta (>1) and low beta (<1) if it is less volatile than the market.

 

It is preferred that a fund have a high beta when the markets are generally trending up and a low beta when they are in a decline. This adjustment is dependent on the fund managers’ skills.

 

Mutual Fund Returns

 

4. Action on unregulated investment products

 

SEBI and RBI have been advising retail investors to be cautious of unregulated investment products such as digital gold and crypto with the latter and its use cases coming under an increasing number of taxes and high tax rates.

action on unregulated products like crypto

 

P.S. The recent RBI repo rate hike i.e. putting in motion an increase in interest rates will unequally affect different asset classes.  

 

Stocks & Equity MFs

Stocks of companies that are highly leveraged i.e. take on loans frequently such as a large proportion of small-cap stocks and small-cap mutual funds are likely to be affected more as interest payouts are set to increase and the supply of loans will decline as well.

 

Fixed-Income and Debt Mutual Funds

For P2P lending investors, this may mean potentially higher yields.

For debt mutual funds, an increase in interest rates is usually bad news as rising interest rates mean that the prices of bonds (in which debt MFs invest) fall as investors prefer to wait for new bond issuances that will give higher yield. This is more relevant for longer-term debt investments, however, the impact on shorter tenure investments should be less.

 

 

 

About us:

IndiaP2P is an RBI licensed peer-to-peer lending platform offering ready-to-invest in portfolios of fractionalized, diverse loans earning up to 18% p.a. in fixed-income returns. Learn More

Other Blogs


Impact of rising interest rates on your investments

Jun-08-2022


impact-of-rising-interest-rates-on-your-investments

Inflation has risen across the globe to become a pain point for policymakers who grapple with rising prices and faltering economic growth. Things seemingly turned worrisome when the Reserve Bank of India (RBI) raised the repo rate by 40 basis points on May 4 and again on June 6.  With the growing interest rates, should investors like you need to worry? What should be your strategy towards investment during such times? Let’s find out.   First, let us revisit the connection between inflation, interest rate, bond yields etc.   Inflation and interest rates are directionally related, i.e. they tend to move along the same trend but with some lag. RBI and other central banks desire positive but manageable inflation rates. A negative inflation rate or deflation means degrowth in the economy because with rapidly decreasing prices, consumers tend to pause/postpone their spends leading to slowdown in economic activity.   Fundamentally, the supply and demand...

READ MORE

What is the tax rate on my investment? - June 2022

Jun-07-2022


what-is-the-tax-rate-on-my-investment-june-2022

Many of us are unprepared for the tax payouts applicable to our investments and forget to factor them in.    Here's a ready reckoner to help you estimate your 'post-tax returns' and compare investment options.   Tax Rates on Your Investments   Tax Type  Short Term Gains  Long Term Gains Equity mutual fund  Post-tax earnings are added to your income and taxed as per your individual tax slab. 15% + 4% cess 10% + 4% cess (LTCG >1 year) Debt mutual fund  Post-tax earnings are added to your income and taxed as per your individual tax slab. At the tax slab rate of the individual  20% + 4% cess with indexation (LTCG >3 year) Equity  Post-tax earnings are added to your income and taxed as per your individual tax slab. 15%  10% over and above Rs. 1 lakh without indexation (LTCG >1 year) Debt Listed At the tax slab rate of the...

READ MORE

How does IndiaP2P offer such high returns with low risk?

Jun-03-2022


how-does-indiap2p-offer-such-high-returns-with-low-risk

How does IndiaP2P offer such high returns with low risk?   IndiaP2P’s first-of-its-kind return-risk profile is the result of a unique yet large arbitrage opportunity that exists in the debt markets of emerging economies such as India.   First, let’s recap how the equity and debt markets differ. While retail investors have had access to equity investments for long, debt has been gaining in popularity over the last decade.   Read on…   We all have come across the terms debt and equity quite often. And while we may use them in the same breath, they are actually quite different. Equity is the process of raising capital by selling a portion of shares from the business.  For example, you receive a certain amount of capital infusion in your company in the form of equity. This means that you don't have to repay the amount later. However, the investor receives a portion of shares. Hence, they will receive profits in sync with their...

READ MORE


Featured In

Have more questions? Click here to schedule a quick call with our investments team

CHAT WITH US

Start Investing