Understanding Mutual Funds and How a NRI can invest in Mutual Funds

Mutual-Funds

Today we will discuss on mutual fund industry in India, in this topic we will guide you how to select the fund. Also we will cover special aspect of NRI Investment in India and their taxation.

Types of Equity Mutual Fund

  1. Large Cap Equity Mutual Funds

In this investment of Minimum 80% of total assets is made in Equity of large Cap Companies i.e. (Top 100 Companies). This type of funds are more stable as compare to mid and multi cap mutual fund. Suitable for investor who has horizon of 3 years this fund normally give return of 15-18 Percent in long term as per past records

  1. Mid-Cap Mutual Fund

These type of Fund invest around 65% of their total assets is made in equity of Mid-Cap Company (i.e. Ranking from101 to 251). Return in these type of fund is higher as compared to Large Cap Fund with higher volatility then large cap. Suitable for investor who has horizon of 5 years this fund normally give return of 18-20 Percent in long term as per past records

  1. Small Cap Mutual Fund

Invest Around 65% of Total assets is made in equity of Small Cap Company (i.e. less than 250 ranking). Most of the companies in India fall under this category and investment in these give higher return than large and Mid-Cap Fund Suitable for investor who has horizon of more than 5 years this funds are more volatile this fund normally give return of 24-30 Percent in long term as per past records

  1. Multi Cap Mutual Fund

In this type of mutual fund around 65% of investment are made in large, mid and Small Cap Companies in varied proportion. And Fund manager keep changing the proportional to meet the investment objective. If an investor want to invest in only one fund to take the benefits of above three funds (large, mid and small) he can choose that option Suitable for investor who has horizon of more than 3 years. This fund normally give return of 18-22 Percent in long term as per past records

  1. Large and Mid-cap Fund

In this Fund investment of around 35% of total asset is made in mid cap companies and 35% in large cap companies. This offer a good return with less volatility

  1. Equity Linked Saving Scheme

ELSS is a Mutual Fund that invest in equity and equity related investment to generate high return. It is the only fund that is eligible for deduction under 80C of income tax act for amount upto 1.5 Lakh.

  1. Balance Advantage mutual fund

In this type of fund aim was to minimize the investor risk by investing proportionately in equity and debt. And changing proportion to maintain return this type of funds are more stable Suitable for investor who has horizon of 1-2 years. This fund normally give return of 10-15 Percent in long term as per past records

  1. Dividend Yield Fund

Investing of these type of fund is predominately in dividend yield stocks I.e. Companies having better dividend pay-out. Suitable for investor who want regular income.

  1. Focused Fund

Portfolio of these type of fund contain investment in not more than 30 companies. And these scheme focused on particular segment i.e. large, mid or small.

  1. Sectorial or Thematic Fund

Investor who want to invest in a particular sector can invest in these type of fund. These type of fund invest 80% in particular selected sector companies equity or equity related instruments. Suitable for investor who want to time the market and earned higher return. This is suitable for 3-4 year after that investor need to switch the funds. 

Various Options in Mutual Fund

  • Systematic Withdrawal Plan (SWP)

When an investor want regular income from his mutual fund can opt for SWP scheme. Under SWP scheme a facility to investor is given to withdraw a fix amount regularly. Amount and frequency can be chosen by the investor. An option of withdrawal of only gain keeping capital is also available. So on set date the Fund will sold the particular unit and transfer the amount to the investor.

  • Systematic Investment Plan ( SIP)

When Investor does not want to invest lump sum amount in the Mutual fund then he can opt for SIP investment Plan. Under this plan investor make a regular payment in mutual fund in which Amount and period is chosen by him. So a small amount is invested regularly which will give benefit in long run.

  • Systematic transfer Plan (STP)

If the investor has lump sum funds available but does not want to invest in lump sum he can choose that option he can invest in liquid fund and switch that money in equity fund But the Fund Chosen should be of same Asset management company (AMC). So it give advantage to grow consistently and cater the market fluctuations.

 Procedure for NRI to invest in mutual fund in India

As to gain Benefit of growth from the mutual funds an NRI has to follow steps to invest in mutual fund in India

  • Opening of an NRI account in India as NRI cannot invest through regular saving account. It can be NRE or NRO account as choice of Investor.
  • Then KYC to done which follows
  1. Filling of KYC form
  2. Submission of Documents
  • Address proof ( Oversea and Domestic)
  • A copy of passport
  • Photograph
  • Copy of Pan Card
  • Bank Statement
  • Attestation of KYC documents from authorised person.
  • In- person verification weather Online or Offline will be done.

Way of Investing

  • Self or Direct investment – In this NRI can himself invest through NRI account.
  • Power of attorney – Any person can be authorised by the NRI by giving him power of attorney. So all transaction will be made by him on behalf of NRI.

Redemption of fund by NRI

Withdrawal of fund for an NRI is same as citizen. They just to opt for withdrawal in mutual fund portal and with the span of time the money will be credited to their Bank account weather NRE or NRO after deducting the applicable taxes, if any.

As per taxation point of view the gains are taxable on the basis of holding period. Short term capital gain (Sold within in one year) at 15% and Long term capital gain (Sold after one year) at 10% above 100000 without indexation benefit.

As from Double taxation rule, If India has DTTA (Double tax Avoidance Agreement) with NRI country, And gain is taxed in india then NRI don not need to pay tax again on same income in country residing.

Top Mutual Fund Managers in India 

This are the list of Top fund manager who has good track record, investor can choose any of the below fund as per their objective.

S.NoFund ManagerMutual Fund
 

1

Shreyash DevalkarAxis Mid cap fund

Axis Blue-chip fund

2Anupam TiwariAxis Small cap fund
3R. SrinivasanSBI Small cap fund
4Shridatta BhandwaldarCanara Robeco Emerging Equities Fund
5Rajeev ThakkarParag Parikh Flexi cap fund
6Ajay TyagiUTI Flexi cap fund
7Sankaran NarenICICI Prudential large Cap Fund

ICICI Prudential Mid Cap Fund

ICICI Prudential Multi Cap Fund

 

8Prashant Jain

 

HDFC Equity Fund

HDFC Top 100 Fund

9Saurabh PantSBI Large & Midcap Fund Regular -Growth
10Neelesh Surana

 

Mirae Asset India Equity Fund

Mirae Asset Emerging Bluechip Fund

11Anoop Bhaskar

 

 

IDFC Core Equity Fund

IDFC Multi-Cap Fund

IDFC Sterling Value Fund.

12Amit GanatraInvesco India Growth Opportunities Fund – Growth
13Anup UpadhyaySBI Magnum Multicap Fund – Growth
14Harsha UpadhyayKotak Standard Multicap Fund -Growth
15Satyabrata MohantyAditya Birla Sun Life Equity Advantage Fund – Growth-regular Plan
16Anil ShahAditya Birla Sun Life AMC Limited
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