Goodwill Investor Education Initiative: GoodWill Eagle’s Eyes!
Investors are in for pleasant surprises in the market: Midcaps MFs do well:
“Worst is over, India experiencing a V-shaped recovery”: CEA of GOI -Subramanian
‘The pandemic coming under control will eliminate the uncertainty and thereby bring back discretionary consumption.’
The market is flush with a lot of news which would impact the share-counters. The GDP is said to be the worst in many recent years -over 20 % down and the Chief Economic Advisor to the GOI says that the worst is over. Demand for passenger vehicles picking up, Agriculture Khariff produce said to be good with the plenty of monsoon across the country, Fertilizer lifting is found to be normal, Tractor sales picking up, the lockdown being lifted in many parts of the country, the next tranche of GOI fiscal stimulus is ready-all these go to prove that the things seem to be for better- yes light at the end of the tunnel.
The matrix that we have got in the April to June quarter is because of exogenous factors. The Covid ’19 has affected the entire global economy. This year, the fraction of countries where the GDP per capita will shrink is the highest in 150 years since 1870. This is the first time that a number of countries will see a substantial decline and so it is a once in a one-and-a-half century kind of event. It is a clear exogenous shock.
The entire global world was in lockdown in the April to June period, India in fact was in a stringent lockdown with several restrictions on economic activity during this quarter. Therefore the significant decline in the economic activity was not unanticipated. Just to give you a one-one comparison, let us take the UK economy because in terms of the size of GDP, it is very close to the Indian economy. If you go by the Oxford Universities index for the stringency of the lockdown, in the UK economy, the lockdown was less stringent than in India. India had a 15% more stringent lockdown. The UK economy contracted by 22% and so the 23.9% contraction in India is along expected lines.
What is important to keep in mind is that India is experiencing a V-shaped recovery. The core sector output, which had declined 38% in April, has periodically regained momentum and in July, it was 9.6% after recording 22% and 13% in May and Jun
Similarly if you look at the railway freight which is often a very good indicator of economic activity, it was 95% of the previous year’s level in July and in August, it is 6% higher than that in the same period last year. Similarly, the e-way bills are almost at the same level as last year’s at 99.8% if you take the 26 days of August where the data is available. This is despite some local lockdowns that are still going on.
The good news for the Investors is visible. The MFs which have heavily invested in mid-cap funds did suffer earlier but now we find many of them are rewarding the investors with over 10-14 % on an average which is a pretty decent ROI compared to the FDs of banks and NBFCs.
TOP PERFORMING MID CAPS
Mid-cap mutual funds are those that invest at least 65 per cent of the corpus in companies lying between 101-250 by market capitalization. Top performing mid cap funds are the top rated mid cap funds giving good returns.
- These companies have the potential to become large companies in future years
- Ability to outperform even large-cap funds or diversified equity funds during a bull run
- Suitable for aggressive investors having the appetite for taking higher risk and have long investment horizon
- Gains on equity funds are subject to taxation @ 15% for holding period less than 1 year and @ 10% for more than a year if gains are more than 1 lakh.
So investors are advised to seize this opportunity and make a reasonable gains in the mid and long term basis by investing in MFs under SIP.
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