Download Tax Saving Mutual Fund Application Forms
Invest In Tax Saving Mutual Funds Online
Leave a missed Call on
94 8300 8300
Interest Rate Futures - IRFs
But getting too aggressive with the instrument can hurt if you get the view on the direction of interest rates wrong. Have limited exposure
If you have a view on interest rates, that is, if you feel these are either headed up or down, you have the option of participating in the fixed income market by investing less than ₹ 10,000. Thanks to the new interest rate futures (IRFs) launched by MCXSX on Monday, and the National Stock Exchange on Tuesday, it is possible for retail investors to benefit from their view on these.
IRFs are similar to equity futures. Here the future contracts of buy or sell are of underlying government bonds, similar to future contracts of stocks. The minimum contract value is pegged at ₹ 2 lakh and initial margin which you have to pay upfront is around three per cent. This works out to ₹ 6,000. If you have a view that interest rates on G- Secs are likely to come down, say from current levels of 8.5 on 10- year G- Sec to eight per cent, the options to invest and make returns are an income fund, tax- free bonds, non- convertible debentures (NCDs) or G- Secs directly. But because of liquidity issues and smaller ticket sizes it is not easy to get in and come out easily with the exception of mutual funds. If you want to get out of your mutual fund investment before one year, you will have to pay exit loads. Similarly, in the case of taxfree bonds or G- Secs, it is very difficult to find sellers, especially if the amount of bonds you want to sell is small.
This is where IRFs will provide an additional option and an easy entry and exit. You can make a profit ( bond prices rise when interest rates fall), if your views turn out to be right.
There is going to be high liquidity IRF market this time because of product re- tuning. It is another option to invest if you have a directional view on interest rates. But there is also the risk of losing your capital, due to which retail investors usually stay away from derivatives If you feel your call is wrong you can let the contract expire. But usually it is better to roll over the contract for six months to one year, because by then usually the interest rates scenario will change and you can recover your capital. Azeez says he would advise it for individual investors, since most of them have portfolios skewed towards debt. However, one should do it only after a thorough understanding of the product. One way to gain from a view on interest rates is to divide your investment between a fixed maturity plan (FMP), which will offer a fixed return, and IRF, since you can get out of it by booking profits. How much should be divided between the FMP and the IRF will depend on the view on interest rates. You can use the FMP as a passive portfolio and the IRF as an active portfolio. Since it is only futures and not options, you can only sell it or rollover. So, the risk is minimised.
While theoretically IRFs can be used to hedge your longterm loans such as home loans or your investment in long- term instruments like tax- free bonds, experts advise against it. Retail investors invest in tax-free bonds for the consistent tax-free income that it provides over the long term. So, there is no need to hedge your investments in tax- free bonds
For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call
Leave a missed Call on 94 8300 8300
Leave your comment with mail ID and we will answer them
OR
You can write back to us at
PrajnaCapital [at] Gmail [dot] Com
---------------------------------------------
Invest Mutual Funds Online
Download Mutual Fund Application Forms from all AMCs
Download Mutual Any Fund Application Forms
---------------------------------------------
Best Performing Mutual Funds
- Largecap Funds Invest Online
- DSP BlackRock Top 100 Fund
- ICICI Prudential Focused Blue Chip Fund
- Franklin India Bluechip
- ICICI Prudential Top 100 Fund
B. Large and Midcap Funds Invest Online
- ICICI Prudential Dynamic Plan
- HDFC Top 200 Fund
- UTI Dividend Yield Fund
- Birla Sun Life Front Line Equity Fund
- Franklin India Prima
C. Mid and SmallCap Funds Invest Online
- Reliance Equity Opportunities Fund
- DSP BlackRock Small & Midcap Fund
- Sundaram Select Midcap
- IDFC Premier Equity Fund
- Birla Sun Life Dividend Yield Plus
- SBI Emerging Businesses Fund
- HDFC Mid-Cap Opportunities Fund
- ICICI Prudential Discovery Fund
D. Small and MicroCap Funds Invest Online
- DSP BlackRock MicroCap Fund
2. Franklin India Smaller Companies
E. Sector Funds Invest Online
- Reliance Banking Fund
- Reliance Banking Fund
- ICICI Prudential Banking and Financial Services Fund
F. Tax Saver Mutual Funds Invest Online
1. ICICI Prudential Tax Plan
2. HDFC Taxsaver
- DSP BlackRock Tax Saver Fund
- Reliance Tax Saver (ELSS) Fund
G. Gold Mutual Funds Invest Online
- Relaince Gold Savings Fund
- ICICI Prudential Regular Gold Savings Fund
- HDFC Gold Fund
- Birla Sun Life Gold
H. International funds Invest Online
1. Birla Sun Life International Equity Plan A
2. DSP BlackRock US Flexible Equity
3. FT India Feeder Franklin US Opportunities
4. ICICI Prudential US Bluechip Equity
5. Motilal Oswal MOSt Shares NASDAQ-100 ETF
No comments:
Post a Comment