Equity Mutual Funds

contact us

Equity Funds generate significant returns by investing principally in stocks across all market capitalizations. However, the returns are directly proportional to the market volatility. Their counterparts, debt and hybrid funds give significantly low returns, as compared to equity funds.

How do Equity Funds work? 

Equity Funds contribute at least 90% of their assets in various organizations' large-cap, mid-cap, or small-cap keeping in view investment objectives. The remaining sum may be invested into cash and cash-like instruments to take care of risk and return factors. The fund manager settles on purchasing or offering opportunities to exploit the changing business sector developments and tries to procure the most extreme returns. 

Who should Invest in Equity Funds?

One’s choice to put resources into equity funds should be in a state of harmony with one’s risk profile, time-horizon and goals. Returns on equity not only depends on market behaviour but a longer duration of investment generally gives better returns.

Diversification is a critical part of managing one’s portfolio. To achieve that goal, there are different sub-categories of Equity Mutual Funds to choose from.       

Market Capitilisation related funds

Market Capitalisation based Mutual funds are categorised as follows:

  • Large-cap equity funds invest in the top 100 companies listed on stock exchanges such as BSE and NSE, based on market capitalisation.
  • Mid-cap equity funds invest in the 101st to 250th companies in terms of market cap.
  • Small-cap equity funds invest in companies beyond the 251st in terms of market cap.
  • Multi-cap funds invest in companies of all sizes. SEBI has mandated these funds to allocate at least 25% of their holdings to each category, i.e., large-cap, mid-cap, and small-cap.
  • Flexi-cap funds invest in companies of any market capitalisation with no constraints on minimum holdings in any market cap category.

Sector Funds

Sector Mutual Funds are equity schemes that invest in a specific sector of the economy. Broadly speaking, these sectors are Real Estate Funds, Utilities Funds, Natural Resource Funds, Technology Funds, Financial Funds, communication Funds, Healthcare Funds and Precious metal Funds.

These funds allow investors to participate and reap the benefits happening at different sectors of economy at different point of time.

Thematic fund

Ideas based on certain themes along with sectoral principals are the thought behind the investment in Thematic Mutual Funds. For instance, an infrastructure theme fund will invest in cement, power, steel, among other sectors.

Solution-based funds

Solution Based Mutual Funds primarily are customised for investors with a specific objective in mind i.e. Retirement, Child-Education etc. these funds generally have long duration of investment tenure. Investments in such funds are locked in for a particular period of time.

Index Fund

Investors must attempt to diversify their funds across different asset classes like debt, real estate, equity, gold, etc. As the name suggests, an Index Mutual Fund puts resources into stocks that follow indices like NSE Nifty 50, BSE Sensex, and so on and so forth. These are passively managed funds and assets are allocated into stocks as present in the underlying index in a similar amount and don’t change the portfolio composition, returns are proportional thereof. However, tracking error risk is involved scarily.

ELSS – Equity Linked Savings Scheme

Investors search for opportunities to help them create better returns on their investments and also save taxes. ELSS (Equity Linked Savings Scheme) are Funds which offer tax exceptions of up to ₹ 45,000 under Section 80C of the Income Tax Act under Old-Tax regime. ELSS funds invest their corpus into equity or equity-related instruments, hence they are able to give better returns than other tax-saving instruments available for investments in the market.

Global Based Mutual Funds

Global Based Mutual funds are those funds, which prevalently put resources into the international indices, equity stocks, equity-related instruments, and debt securities of organizations/elements listed on stock exchanges outside of India. Generally, these mutual fund schemes essentially invest in overseas based financial instruments like mutual funds and hence they are referred to as fund of funds.  

Tax liability on Equity based Mutual Funds

To come under equity-based Tax liability the funds chosen by one should have their investment minimum of 65% in India-based equity and equity-related instrument

Short-Term Capital Gain ( STCG ) – If the capital gain is booked before the completion of 365 days then the said capital gain is taxed at flat 15%.

Long Term Capital Gain ( LTCG ) – if the capital gain is booked after the completion of 365 days of investment tenure then the said capital gain is taxed at 10% with first one lakh of LTCG exempted.

-

Contact Us