Tag: Indian Market
The Reserve Bank of India (RBI) intimated in October 2021 that it had got approval for a modification to the Reserve Bank of India Act 1934 that would broaden the definition of bank note to include CBDCs. The central government has emphasised the potential benefits of CBDCs, claiming that they will lessen reliance on fiat currencies.
In another major announcement, Sitharaman said that all income from the transfer of virtual digital assets will be taxed at 30%. This will impact gains from cryptocurrencies and NFTs.
She further highlighted that no deduction will be allowed for expenditure undertaken on its acquisition. The loss from transfer of virtual digital assets cannot be set off against any other income.
The Finance Minister also proposed to provide for TDS on payment made in relation to transfer of virtual digital assets at the rate of 1 percent of such consideration above a monetary threshold. Gift of virtual digital assets has also been proposed to be taxed in the hands of the recipient.
India’s crypto industry had several demands, including that the government classify cryptocurrencies, provide clarity on taxation and establish a self-regulatory framework shaped by the crypto industry.
Many countries have rolled out their CBDCs recently. Nigeria launched eNaira in October last year. The Bahamas and five other islands in the East Caribbean have also rolled out their digital currencies.
(Source: The Financial Express)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
Fund Objective
The investment objective of the scheme is to provide the investors an opportunity to predominantly invest in corporate bonds rated AA+ and above to generate additional spread on part of their debt investments from high quality corporate debt securities while maintaining moderate liquidity in the portfolio through investment in money market securities.
Approach
The fund’s strategy is to generate attractive returns through high-quality corporate bonds and short duration mandates. It employs a bottom-up approach combined with a top-down overlay to generate superior risk adjusted returns. The managers use various qualitative and quantitative parameters and put a lot of emphasis on a company’s management, business, and financial health. They also use the analysis of sell-side research and credit rating agencies to form a view on the creditworthiness of companies but to a limited extent. The credit committee then reviews the rated securities, and the approved securities are assigned credit and tenor limits. While constructing the portfolio, the managers have the flexibility to implement the trades with reasonable leeway to express their views. The risk-management team periodically reviews the portfolio to ensure the managers adhere to the guidelines. We believe the flow of ideas/information is effective and fits nicely with the process in place, supporting an Above Average Process rating.
Portfolio
The fund has a higher credit-quality portfolio, making it more liquid and less prone to credit risk. The fund maintains 100% of its assets in AAA rated bonds, despite having the flexibility to take some allocation in lower-rated instruments. The duration of the portfolio is well managed between one and three years. The fund also invests in government securities based on portfolio manager’s view on interest rates, but this does not account for more than 20% of its net assets. But high allocation is made to state development loans, given attractive spreads with regard to central government securities.
The portfolio of the fund is well diversified. The manager also intermittently holds higher cash/money market instruments to take opportunistic trading calls when markets are bumpy.The strategy, however, is not without risk. The fund may underperform its peers if the market favours high-yielding bonds. Also when interest rates are falling, the fund may struggle to outperform its category peers that invest in a portfolio with a little longer duration.
Performance
Under a short tenure of the fund’s existence (February 2019 to December 2021), the fund’s direct share class has posted an excellent annualised return of 8.36% as against the category average (7.14%). The portfolio manager’s research-intensive approach has helped the fund generate superior returns, placing the fund in the first quartile.
In terms of year-on-year returns, the fund’s performance has been inconsistent. The fund outperformed most category peers by a wide margin in 2019 and 2020. However, the 2021 performance got impacted because of the fund’s conservative approach with regard to its peers. On expectation of normalisation of interest rates by the RBI, the manager kept the duration below two years. This resulted in the fund ranking in the fourth quartile as against its category peers. However, the fund has the potential and could bounce back going ahead.
About the fund
The investment objective of the scheme is to provide the investors an opportunity to predominantly invest in corporate bonds rated AA+ and above to generate additional spread on part of their debt investments from high quality corporate debt securities while maintaining moderate liquidity in the portfolio through investment in money market securities.
The fund follows a disciplined and risk-conscious investment process that draws extensively from the in depth expertise of the investment team. The process is bottom-up with a focus on high-quality business models with a top-down overlay. The team’s understanding of the markets and frequent interaction with its equity team and parent company give it an edge in forming views on the business and creditworthiness of the companies. Furthermore, it has built some additional aspects into the approach. They now do an even more detailed analysis of the group and the promoter-linked entities in which they invest.
The execution of the process has been above average with limited credit risk and a short duration strategy. Despite having the flexibility to invest up to 80% of its portfolio in AAA and AA+ rated corporate bonds, the manager constructs the portfolio with a primary focus on liquidity, avoiding exposure to the below AAA rated segment, and keeping the duration between 1 and 3 years
(Source: Morningstar)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.