Investing in Mutual Funds: Lok Sabha elections and the stock market are closely related. In an election year, markets face some volatility. We have a similar story this year. Elections create uncertainty and the potential for policy change, which can impact investor sentiment and market performance. Investors may become cautious and adopt a wait-and-see attitude until election results are announced, which could increase market volatility.
In India, market volatility is observed to increase as elections approach due to various factors. As can be seen from the India Volatility Index (VIX index) during the 2009, 2014 and 2019 general election periods.
So far this year, we’ve seen an initial market rally before the election. On March 20th he reached a level of 21,839 points and on April 10th he reached 22,753 points. During this period, Sensex increased from his 72,101 points to his 75,038 points.
The market then declined and by April 18, the Nifty had fallen to 21,995 points and the Sensex to 72,488 points. Since then, Nifty has been trading between his 22,750 points and 22,800 points and Sensex between 72,000 and 75,100 points.
Stock savings funds may come in handy as markets become difficult to navigate amid heightened volatility, Mirae Asset Investment Trust said in a note. Equity Savings Fund is an unrestricted mutual fund program that falls under SEBI’s hybrid category.
What is an equity savings fund?
Equity savings funds typically invest in three asset classes: stocks, arbitrage, and bonds. For mutual funds to be subject to equity taxation, at least 65% of their net assets must be invested in stocks or equity-related instruments. Net capital levels range from 15% to 45%, with the remainder invested in arbitrage.
So, for example, if the net asset level of an equity savings fund is around 20%, a minimum of 45% will be in arbitrage. The remaining 35% can also be allocated to bonds or arbitrage.
Investing in a stock savings fund
Mirae Asset Mutual Fund claims that its mix of stocks, arbitrage and bonds is effective, especially during volatile times.
5 reasons to choose a stock savings fund
> Retail investors, especially conservative investors, are finding it difficult to enter the market and allocate across their assets after the all-time high.
> Recent interest rate suspensions by the Reserve Bank of India (RBI) and the Federal Reserve suggest that interest rates may have peaked. In addition to all this, recent tax changes for debt funds have made asset allocation even more complex for retail investors.
> In this regard, hybrid category equity savings funds may be considered by investors with moderate risk appetite who seek downside protection.
> Apart from equity and debt, these funds may use equity arbitrage through derivatives to reduce risk and generate better inflation-adjusted returns.
> These funds are suitable for people who cannot tolerate excessive fluctuations in the value of their investments.
“Equity asset classes help create long-term wealth. Because they are linked to the market, they tend to face relatively high volatility, especially during times of uncertainty. Arbitrage is the It’s all about profiting from mispricing opportunities between the spot and futures markets.” Arbitrage has relatively low risk compared to pure equities, and bonds are a relatively stable asset class with reasonable returns. ”AMC said.
Some popular stock savings funds
| funds | Fund size | Returns (pa) |
| Fund size of UTI stock savings fund | 357 million rupees | +13.07% |
| Mirai Asset Stock Savings Fund | 1.02 billion rupees | +12.99% |
| HDFC Stock Savings Fund | 418 billion rupees | +13.22% |
| Kotak Stock Savings Fund | 5,132 million rupees | +13.42% |
| Mahindra Manulife Equity Savings Fund | 485 million rupees | +13.73% |
| Edelweiss Stock Savings Fund | 389 million rupees | +11.84% |
| ICICI Prudential Equity Savings Fund | 10,118 billion rupees | +9.33% |
| PGIM India Equity Savings Fund | 91 rupees | +8.77% |
Disclaimer: Opinions and investment tips provided by investment experts are their own and do not belong to Business Today. Readers are advised to consult a qualified financial advisor or SEBI registered investment advisor before making any investment decisions.
