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Opto Circuits (India) Ltd. | Is It Going To Make Upper Circuits | When And Why?

Company Name: Opto Circuits (India) Ltd.

Industry: Meditech (Medical Technologies)

Sector: Hospitals & Medical Services

CMP NSE: 9.95

CMP BSE: 9.96

It was the year 2012, the month Aug and the date 17. Motilal Oswal Securities have given a neutral rating to ‘Opto Circuits (India) Ltd. The target price was Rs.173 at the then market price of Rs.147.55. It was the call given after the knowing  fact that the  balance sheet was under the stress and indicating its negative future cash flows. That’s what is called,  the power of goodwill, Opto Circuits (India) Ltd., has had on its records.

Opto Circuits (India) Ltd. – A Victorious Beginning

This 1700 Crore company, Opto Circuits (India) Ltd, started its journey in 1992, as a manufacturer of Sensors. These Sensors as a peripheral components were supplied to the large scale medical equipment manufacturers. Since from then the company has been operating under two segments – The health Care and Information technology. The motto was and is clear – Guaranteed Quality And Innovation.

‘Products and Business’ – The Brand of Quality Assurance

Opto Circuits (India) Ltd., is a multinational medical device company. It designs, develops, manufactures, markets and distributes a range of medical products that are used by healthcare establishments in more than 180 countries. The company specializes in vital signs monitoring, vascular treatments, emergency cardiac care and sensing technologies.

Their other products include optical sensor, security systems, medical electronics and chip-on-board assemblies. These high quality peripheral products are provided by them for many reputed companies around the globe.  All are high in demand.

Proved Marketing Expertise

Apart from manufacturing, OCIT has an efficient marketing wing too. Highly reputed brands like MED Aid, Critical Care Systems, Euro care, Unetixs and Cardiac Science are marketed by Opto Circuits. All these are, USFDA listed and CE marked products and gained reputation in a very short span of time.

List of Prestigious Awards – A Symbol of Repute

If, bagging a single award is a hallmark of purity and prestige  for any business, what we can say about the list of awards that ‘Opto Circuits (India) Ltd., has in its basket?!!!
  • Annual Export Award (2011)
  • Best Performer I Electronics (2007 – 2008) & (2008 – 2009)
  • Overall Best Performance in VSEZ (2009 – 2010)
  • Forbes’ 200 ‘Best Under a Billion Asian Companies (For 2011der)

Why, Dr. Vinod Ramnani, CMD, Opto Circuits (India) Won the Prestigious ‘NextGen Entrepreneur of the Year Award?

For methodically moving up the value chain from non-invasive medical products to high-tech branded devices. For building a research-driven cross-border organization.

These are, a very few of very renowned awards that Opto Circuits India has bagged. There are many others too, try to add here asap.

But Why the Free-Fall

Apart from  such an astonishing and winning history, the stock value has been falling from its all time high of 262 to the recent all time low of Rs.8.12 is a matter of big concern. Sometimes one small (wrong) aggressive step may lead to destruction. That’s what happened in the case of ‘Opto Circuits India Ltd.”. Aggressive expansion. This is the common mistake done by many businesses that led to their devastation. That’s what happened in the case of Opto.

Since from 2oo1 Mr. Romania started to acquire many small and big companies in India, Europe and United States. Paid up sums were very huge. As a result, the Bangalore based and headquartered Opto Circuits India Ltd., turned in to a fairly formidable healthcare products company. The profits that were generated were distributed back to the investors in the range of 30% -40%.

Mr. Ramnani, supposed to stop there itself. But he couldn’t. In the year 2010 he spent $60 million towards 3 acquisitions, which is, a quarter of the company’s $245 million annual revenue. This, finally anyway, led to a huge fall in the stock price from Rs.222.91 in 2012 Feb’ 22nd to 143.35 in June 2012. And, the company couldn’t digest the acquisitions, and the fall continued to the year 2013 to the recent low of Rs. 8.1 on Feb’11, 2016.

Fundamental Analysis


Current Asset Base

Total current Assets of around Rs. 1700 Crores, against the total equity share capital of Rs. 242.32 Crores is a very good concern and safety net for its investors.

Book value

The current book value of Rs.69.67 against the Current Market Price of  9.96 is saying that it’s a value pick and just buy for a long hold.



Its current Zero EPS is not a big concern, once the company receives all the benefits and seed capital for its proper functioning. Once the business picks up, the EPs starts to appear and grow quarter to quarter.

Contingent Liabilities

These a contingent liabilities figure on the balance sheet. An around Rs 689. 95 Crores of contingent liabilities, the company has to overcome in the future. For a well established business like OCI, this number is not so big. I have a hope and trust in the company’s return-to-back future prospects.

Technical Analysis

As a technical analyst I’m sure that the chart is on its bullish trend. If not so promptly, but will move forward very soon.

Why I Recommend To Buy

PMO Push – A Great Hope for Its Future Performance

After PMO push, Dept of Pharmaceuticals fast tracks formulation of medical devices policy

In order to attract FDIs, The Prime Ministers Office has been pushing the ‘Department of Pharmaceuticals’ to fast tract the ‘Medical Devices Policy’. In a meeting convened by the Prime Minister, this issue has been discussed in detail. According to the department of Pharmaceuticals (DoP), the work on this policy has been expedited and will be released soon.

India imports its 80% of its medical device requirements. The police assumed much significance in this regard too.

According to sources, there is an understanding that a robust medical devices policy is required to help realize the full benefit of the relaxation of the FDI policy. FDI up to 100 per cent through the automatic route is permitted for the manufacturing of medical devices in the country

Along with Opto Circuits, the other companies engaged in manufacturing of medical devices include Siemens, Poly Medicure and BPL. There is a need for FDI in the sector as the domestic medical device industry is fragmented into small and medium enterprises and primarily manufactures products such as disposables. The draft National Medical Device Policy, 2015, had proposed incentives for both new and existing medical device firms. It had asked for interest subsidy to MSMEs, concessional power tariff, seed capital, viability gap funding, tax benefits to the sector, minimum or zero duty on raw materials and incentives for exports.

*** There was an order of Rs.91 Crores, from PHILIPs Health care, in December 2016, for the supply of various Medical Devices. And, this will definitely strengthen the business in future. A sure-shot hope.

  • All these are my concerned points about the business, that made me to suggest to buy this value pick for your long-term portfolio. The rest is all your will and wish.


Please don’t forget to comment and share with your social media links.

Thank you for reading. Happy investing!



Forex Trade | How It Functions

Forex is nothing but the short form of ‘Foreign Exchange’. In olden days, people used to exchange their currency for the purpose of trade with foreign countries. And, sometimes, while travelling to another country for any reason. They used to exchange their home country currency with the currency of the country they are going to visit /stay, for the purpose of expenses over there.


But, the current situation is different. We can now exchange different currencies on the ‘Over- The-Counter market’, for the purpose of gains at the rate of speculating the currency rates against the dollar ($). All this trade takes place in the form exchange of one currency for  the other at an agreed exchange rate. Of course, on the ‘Over-The-Counter’ (OTC) market.

Best Ever In The History

In reality the world’s most traded market is nothing but the FOREX /Foreign Exchange Market. According to the Triennial Survey 2016, the Global Turnover of FX markets stood at $5.1 Trillion. Actually, this is down from $5.4 Trillion in April 2013.. This can be considered as the best ever turnover in the FX Market till now. This was happening due to the more aggressive and heightened activity by the traders. The trading currency was Japanese YEN against the background of Monetary Policy developments at that time.

Weekends And Holidays

Even though Forex Markets are considered to be ‘the all time markets’, the actual truth is something different. This market too has a Weekends and Holidays. One could not avail the full services offered by the Banks and Brokers on these days. Hence, one can see the low liquidity in the market. But, the market opens on a high note, in terms of trading activity by the traders.

No Physical Location

Forex Marke doesn’t have any physical location. Unlike most financial markets this over the counter market doesn’t have any Central Exchange too. But, trades take place at a 24 hours a day, through a global network of Banks, Businesses and Individuals. The trade continues due to fluctuation in the prices of different currencies against each other, offering multiple trading opportunities.

24 Hours A Day Market

Sunday evening to Friday night. 24 hours a day, Forex Markets are open. Of course the key aspect of their popularity.


The trading follows the clock to move around the globe, active in different time zones and in different time frames. Starting from Wellington and New Zealand  on Monday morning, progresses towards Asia. Then spearheaded out of Tokyo and Singapore moves towards London to close in New York on Friday.

Price Fluctuations – Volatility

Currency values of different countries rise and fall against each other a lot. These fluctuations in prices are influenced by  Geo Socio, Economic and Political factors. Forex markets respond so quickly and aggressively to any of these factors, including News and Events. Thus, creating plenty of trading opportunities for the  traders. That’s what makes the Forex Trading so interesting and exciting.

Some of the Key- Factors that may influence the Forex prices are.

  • Monetary Policies
  • Currency Intervention
  • Political and Economic Stability
  • Natural Disasters

Leveraged Product

Forex Trading is required to deposit only a small percentage of the full value of the position. Hence, unlike any traditional trading, the potential loss and profit is higher in Forex trading, from an initial capital outlay.

Key Forex Terminology

Price Gapping

When the price jumps from one level to the other without any trading in between, the Price Gapping occurs. This usually happens in other Financial Markets. But, in Forex trading, there is no such price gapping, as traders can take positions whenever they want and also can exit. There are no time boundaries. And, the markets are open for ‘24 hours.

But, there are ‘Lull’ times. During these hours the volumes are extremely low, below their daily average. This usually creates a ‘Wide Spread’, which can be normalized once the trade resumes.

Base And Counter Currency

Forex trading panel shows, pair of currencies to choose between.

A Screen Shot of Forex Market Index

In the above Forex Index Screen, the first currency pair is EUR/USD. And, it’s shown that the Euro is less in value by 1.06138 points. Or in other words, US Dollar gained by the same number of points. The low of Euro (1.06100) and a High of Dollar (1.06149) is also shown.


Spread is nothing but, the difference between the BID and ASK price of the currency pairs.

For example, consider a pair GPB /USD. If the GBP is 1.1535 times the USD, the ASK will not be exactly 1.1535, but it will be a little bit more, say 1.1537. And, the BID will be lesser than 1.1535, say 1.1533. Here the spread is the difference between the ASK and BID prices.

Therefore Spread = (ASK – BID)

i.e (1.1537 – 1.1533) = 0.0004

And, this SPREAD goes to the Specialist who facilitates the trade.


Usually, the currency pairs are quoted to 5 decimal points (0.0001), except the Japanese Yen. The yen is displayed only to two decimal places /points (0.01). The price change is from the fourth decimal place.

A PIP stands for ‘Point in Percentage, measures the amount of change in the exchange rate for a currency pair. In order to provide extra digit of precision, when quoting exchange rates for certain currency pairs. This is called a fractional PIP, which is equivalent to 1/10th of a PIP.

Example: Let’s consider a trade in a pair USD/CAD. If the trade amount is $ 200,000. And, the trade closed at 1.0346, after gaining 10 pips. Calculate, the amount of profit gained in USD.

1 PIP = 0.0001

The total amount of trade in terms of CAD = (200,000) × (0.0001) = 20 CAD

No. of USD per PIP = (20) ÷ (1.0346) = 19.33

The total loss /profit for the trade = (10) × (19.33) = 193.30 USD profit

Hence PIP tells about the Percentage of Points Gained / Lost.


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Syncom Formulations | Why Do It’s Damping Down Investor Confidence

Company Name: Syncom Formulations (India) Limited.

Sector: Pharmaceutical

Current Market Price: 1.95

With market Capitalization of 155.35 Crores, this Mid Cap. Stock on BSE is a very attractive pharma pick due to its low price as well as the consistent year on year (YOY) profit growth rate. The recent ripples, it created in terms of trading volumes is really attention paying.

Falling price scenario really gives, a good opportunity to the bears to gain at the cost of bulls. Each and every time bulls try to take the price up to the next possible high level, bears try to pull it down to accumulate. They accumulate at the lowest possible price and sell at the highest. Hence Bearish Mode is best for Bears to gain at the loss of short-term bulls. Wooing bulls with targets is the strategy. Got it!

Syncom Formulations – An Overview

When I bought this scrip as a long-term holding at 2.15 levels in June last year, I thought it’s the last position that the price can move down. I never expected that it will come back again to my buy price. When it started to come back to 2.50 levels in September, the signal bearish signal was confirmed and I sold out all my holdings. That’s a different matter.Again on March 29th, I had little hope about its bullish startup. No need to say, what happened.

Technical Analysis

Technically, it has surpassed all the stages of its bullish trend. But, there are chances that, the Bulls may take it to up to certain level at their cost, but it may not sustain that position for a long while.

Here I would like to memorize the best saying of Dr. Alexander Elder, a professional trader based in New York city and the author of  ‘Come into My Trading Room’.

Each price represents a momentary consensus of value of all market participants – large commercial interests and small speculators, fundamental researchers, technicians, and gamblers- at the moment of transaction – Dr. Alexander Elder

The above saying of Alexander Elder, directly saying that the current market price of Syncom Formulations is the price decided by all the above said market participants. Whereas, fundamental Analysis only reveals the fundamentals of the company vis a vis its stock.

Fundamental Analysis

Company overall fundamentals are good, as described by many Credit rating Agencies. But, what is that financial factor, that’s driving the stock value to its previous lows is the factor to discover. Let’s start.

Promoter Stake: 41.22

We can say that it’s a good percentage and can’t count into that of low promoter stake category.

P/E: 13.43

Healthy. Good for short term traders to trade and gain.

Book Value: 1.39

Close to current Market Price. This is the price, the stock is running down to touch soon.

Dividend Yield: 1%

Good to say percentage. Nevertheless, the falling stock price may not hit back the long-term investors with the satisfaction, that a tremendous overall gain can give.

P/B: 1.44

At 1.2 levels, there is a chance to its push back. Whether it sustains or not depends on the company performance in the near future.

EPS: 0.14

Last but not the least, the EPS is the main factor in deciding upon the stock value. As long as the EPS is low, irrespective of profit growth rate the stock value falls to continue.

Earnings per share /EPS plays a vital role in stock analysis. EPS is considered as a main financial ratio and the symbol of the potential growth rate.


Trade around, if you are able to track and follow the operator. Don’t invest further /SIP in as a long term investment. If possible sell half of the quantity and buy GTL Infra. Will trade around 100 by 2020.

All the above said analysis is based on the current Profit Growth Rate and Earnings Per Share calculations. If the company bags a huge order for any of its products /introduce a new valuable drug, my analysis may fail. I’m not responsible for your ‘ I Missed The Chance To Gain’ complaint.

Hope you people are better understood my perspective of analysis. Let me know your opinion. ‘Leave a Reply’ is waiting below for you to fill up. Jot down a few words.


Happy Investing.


Financial Planning Advisory | Need And Analysis

A country like India. Where recent past has experienced a very fast economic growth rate and income level of the people has gone up. Where financial investment industry is wooing investors with different financial products. Investors are really confused to choose among? What is the best? Which category and sector? How much? The straightforward answer is the best Financial Advisory Services offered either by individuals / by institutions completely dedicated to offer such services.


If you are keen to know about the facts, how important it’s to avail a Financial Advisory Service, as the best solution for your happy financial status and as well as life ahead, read this article and comment!

What Is Financial Planning /Advisory

Without proper management of current resources, there will not be any surety about the fulfillment of life’s goals /achievements. People from different walks of life, with divergent income levels may have distinctive goals in life. But, the method of achieving those goals is the same. That’s “The proper management of available funds”. So, financial planning is simply defined as follows.

Financial Planning is the process of achieving life’s possible goals, through the proper management of one’s Personal Finances and Available Resources.

Why Do People Need Financial Planning Advisory Services

Numerous Financial Products. Their complexity. Irrespective of abundant available information, there are chances that people may go astray from, what they actually need to choose. That’s where, a financial planner actually plays an active role to articulate the necessary plan to go with. With his /her service, it’s easy to set up goals and draw the plan to reach those goals within the set time frame.

There are numerous factors that can be addressed easily with the help of Financial Planning advisory Service. By addressing these factors, one can not only can reach the life’s goals easily, but also can lead a happy tension free  life with no further financial obligatory tasks.  Because a well defined Financial Plan will have all the safety built-in -features, that will efficiently address, all the life’s goals and financial obligations.

Let’s have a look at all those factors, that a well defined Financial Plan can address.


The best investment that can efficiently deal with inflation is equity. An alternate option is Equity Oriented Mutual Fund Schemes. A well defined Financial Plan includes Equity Component. The percentage varies among individuals. And, it depends on their risk taking capacity and the set goals.


A good Financial Planner always makes sure that, all his /her clients take the benefits of Tax Reliefs, provided by the Government from time to time. It is always necessary to take all those advantages of Tax Benefits, to reduce the tax burden and unnecessary cash outflow.

Increase In Income Levels And Hence The Savings

India is one of the fastest developing countries of the world. In such countries, it’s common to see a high economic growth rate. Income levels of citizens of those countries normally rise at a fast pace.  Being the part of such fast growing economies, people with high income levels have high saving levels too. That too, unlike their counterparts, like developed European Countries, Asians, especially we Indians believe in savings. Believe that savings will ensure their future prosperity.

Financial Planning helps to park those savings in avenues, that drive them to meet their highest aspirations and goals.

Higher Aspirations And Goals

People with High income levels naturally thrive to have highest aspirations and goals in life. It’s quite natural. Whether it’s, buying a home in the up-market locality at an early age /dreaming a fantastic future higher education for the children /happy holiday vacation /the happy retirement. People due to higher income levels, would like to achieve as early as possible.

Without proper financial planning, it’s very difficult to meet all of their goals. Hence, a proper financial plan which considers all these aspirations is compulsory to develop.

Problems That Arise Due To Small Family Stucture

Due to the increasing number of small family structures, the importance of a well addressed financial planning  assumed the utmost importance to stay independent.

Olden days were different. Joint families with certain net worth were always supportive to all its members. Head of the family was acting the role of a fund manager. He /She was always there, to support their individual family members, in their bad financial situations.

So, there is a need to plan for such support, through a proper Financial Planning.


Attractive low interest rates proposed by different financial institutions, including banks, is making the people to borrow more. Sometimes more than their capacity. This anyhow, finally leads to the negative cash flow, which is a threat to anybody’s financial health, which indirectly impacts the physical health too.

One of the most important aspects, that needs to be explained to the borrowers is ‘Leveraging the low interest rates’. A good financial planning explains and avoids such negative cash flow problems successfully.

Confusion Due To Numerous Financial Products

Numerous and similar. Chances are great too misled by such attractive return promises. Need to distinguish from the individuals risk, age and need base point of view. One small financial mistake may lead to havoc.

A professional financial planner chooses the best for you, keeping in mind the aspirations as well as the risk profile.

Product Complexity

A recent revolution in the financial services industry came up with a number of complex financial products. Difficult to understand whether it matches the individual’s need or not. And, how the other market conditions impact those products indirectly, is another matter of big concern to understand.

Difficult to dig around all these matters, in these ‘No Time To The Self Crae’ days. Simple to transfer this workaround to the expert.

Lack Of Social Security

Simply to say – ‘Financial obligations are unlimited’. Irrespective of financial position, status in the society, age, caste, creed or gender, every individual has his /her particular need for finance. Whether it’s for the self or the dependants. Financial cushion /flow is must for everybody’s life.

Those days of ‘I will receive my pension, no tension after retirement’ have gone. Without proper financial planning for the self and the family, all the stages of life become a ship without a rudder.

One of the main objectives of Financial Planning is that of Social Security. No other way to ensure such a peaceful social security in terms of financial security.

Longer Life Expectancy

Thanks to the revolutionary developments in medical field. Life expectancy has been tremendously improved from an average 60 years to 80  years today. Without proper Medical Insurance Planning and Pension planning, and Retirement Planning, it’s very difficult to lead the post retirement life of 20 years.

Worse will be the condition if one quits the job earlier and that too without proper financial planning.

When it is obvious that the goals cannot be reached, don’t adjust the goals, adjust the action steps

– By Confucius (An influential Chinese Philosopher, 551 B.C)


Hedging With Derivatives | An Advanced Stock Investment Strategy

This article is of little use to those investors who are expert derivative traders and know, how to use hedging for their portfolio against market risk. But, of utmost know to factor to the investors, who are away from the derivative segment and are likely to know about. Let’s read.

What is Hedging and Who is a Hedger

A strategic trading strategy in the derivative market, to protect the value of equity portfolio against price fluctuations is called hedging. When there is an uncertainty in the price movement of any stock, stock investors can hedge the price of a stock from a fall, by participating in the derivatives market. And, such investor is then called to be a Hedger.

Hedging is nothing, but securing the price of a stock by speculating market movement. In other words, it’s an advanced equity investment strategy, where the equity investments are protected in the market fall /fall in the price of a stock scenario. Hedging gives a sort of ‘peace of mind’ to the equity investors, by ensuring a more predictable outcome.

Hedging of a Stock doesn’t give more outcome, but it definitely gives a more predictable outcome.

What Are The Types Of The Risks Associated With Any Stock

While buying a stock every investor thinks and hopes that, it will move forward and there will be a hike in the stock price. But, nobody can make sure that the price hike is definite. There are certain risk factors, that may restrict the stock price, and push it down.

The stock price is always a function of many risk factors, which will decide its future. Some are specific to the particular stock and sector. And some are global. Market risk is considered as an external risk factor that will equally affect the entire industry. For example, currently the Diamond Industry, is facing such a type of Market Risk. Which is unavoidable by all the stocks of various companies that belong to this industry.

How To Hedge A Stock

Hedging is an art of ensuring the return of an equity investment apart from market risk. This is done by participating in the derivatives market, and execute exactly the opposite trade. That means, the trade which  opposite to the trade in equity segment. By doing so, one can ensure the return from either the equity /derivative market, as the two segments move in opposite directions. In this form, one can bypass the risk to those who are willing to bear it.

There are two types of derivative contracts, that help the investors to hedge their investments in the cash segment, that is equity. They are Futures and Options.

For example Mr. A holds 100 shares of a company XYZ. If the buy price is Rs. 10 per share, and the stock price is hovering around Rs 10 and Rs.12, for a month. Then Mr. A speculated the price movement towards negative direction. And, he decided to liquidate his holding predicting its future fall. But, his advisor and friend, Mr. B suggested him to hedge his holding  to ensure his future earnings at the cost of the premium to be paid to buy a contract in the derivatives segment. So, Mr. A postponed the idea of selling the shares at the current market price. And, decided to sell the stock at the expected Rs. 15 after 3 months.

Even though there are many contracts to hedge the stock value in derivative segment, the best one is the PUT Option, which he can utilize to sell his stock after 3 months and at the strike price.

Put Option gives the buyer to sell the stock  during a predetermined period and at the predetermined strike price, which is usually above the market price.

The cost of buying a Put Option increases with strike price. That means, higher the strike price, the higher the cost. So, it is always advisable to choose the strike price moderately to hedge the stock.  So, Mr. A chose to buy the 1 ATM Put of 100 shares with the 3 month expiration period.  He paid Rs. 100 towards premium and his strike price was Rs.11

As per his expectation the price of his stock fell to Rs.10. And, Mr.A exercised his option to Put his quantity of 100 shares at Rs. 11 each. The amount he received was Rs. 1100. So, the loss is only the amount that was paid towards commission while buying the stock. In India the Futures and Options, of all the listed stocks expire on the last Thursday of the contract month. If that Thursday is declared to be the holiday, the expiry day will be the preceding Wednesday.

If you like my article, leave your comment. I value your comments, and try to rectify my defaults.

Happy Investing!


The Best Mutual Funds | How To Select

Plenty of Mutual Fund offers. Plethora of information. But, of no use. When it’s time to invest, it’s a common man’s common problem to choose the right one. Try to investigate. Most of the people are stuck in Funds, that were performed well in the past. But currently, not even meeting the benchmark index. All this happens, only when the investor lacks proper knowledge about guidelines, that need to be followed, while investigating into the Mutual Funds.

It’s simple, to pick a well suited Mutual Fund, that matches our requirements. Fund houses are ready with variety of Mutual Funds, that are well tailored to match the financial requirements of people from all walks of life. They are well planned and designed, keeping in mind the financial obligations of different streams of investors. So, it’s our choice to pick the right one to meet our financial goals.

Here are certain guidelines to come up that winner to suit to your financial goals. Let’s Beat the Benchmark Index like a Pro.

Know Your Goals, Risk Profile And Investment Horizons Before Choosing A Mutual Fund

The goal or the investment objective should be the first criteria while choosing the mutual fund for your investment. Goals can be classified as high, medium and low in terms of capital gains. Risk and return go hand in hand. High goal seekers with aggressive return expectations are compulsory to invest in equity oriented mutual fund schemes. These are comparatively riskier than other types of funds, with huge return opportunities. Debt funds are always there for risk averse medium and low goal investors.

A picture of a man's hands , calculating mutual fund returns and writing on a sheet.

An investor with long-term investment period is best to choose a long-term capital growth equity or balanced fund. A young investor with long-term goals, which would probably be high falls in this category. But, an investor with near and medium-term targets are better to engage with short-term debt oriented mutual fund schemes.

What is the category to select?

Debt? Equity? Or Hybrid? Your age, risk taking capacity, investment horizon and future targets are the factors that decide upon the category.

Check Back The Fund Managers Past Performance

Few funds are managed by an expert team. And, few are by a single star fund manager. In the first case, where there is an expert team to manage  the fund the performance would be very clear and peaceful.

Whereas, the fund managed by a single expert manager, we need to look his / her past performance track record. This facilitate us to guess his /her future performance.

Consistency Is The Main Criteria

Duly have a check on the fund performance during those market fall periods. If the fund had done well even in the bear phase, we can say that it has beaten the index.  Otherwise, if had done well in the bull market, and became dull during the fall, it’s a type of fair weather friend. Keep it away.

Consistency in performance is the symbol of its stamina to win. One can be sure to assume that it will beat the Index in the future too. Good to look for the consistency in performance, over longer periods like 3, 5 and 10 years. Have a look at NAV’s of past years. Look for its growth percentage.

Know About The Fund House’s Pedigree

The track record of a fund house is as important as any other factors that help us in selecting a good mutual fund. Try to identify, fund houses with a strong presence and excellent track record in the financial world. Such fund houses have their own investment experiences as well as efficient processes. Consistency in returns is the main feature of these schemes. Sustained performance over a long period of time results in consistent returns.

Make Use Of Statiscal Measuring Tools /Metrics

There are certain risk measuring statistical tools, that may otherwise indicate the investment risks associated with their returns. These indicators make use of historical data for the analysis of not only mutual funds, but also the stocks and bonds.

These ratios simply compare the mutual fund return with the market benchmarks.

Alpha (α)

The simplest definition of an alpha would be the excess return of a fund compared to its benchmark index. If a fund has an alpha of 10%, it means it has outperformed its benchmark by 10% during a specified period.

Beta (β)

Beta measures the mutual fund’s performance-swing /volatility, compared to a benchmark.

For example, a fund with a Beta of 1 means it’s NAV will move 10% upside↑ /downside ↓ in respect of the benchmark index.

High Beta – For aggressive goal seekers with risk taking capacity for the possible high returns


Low Beta – For less aggressive, risk averse investors, who are seeking for stable returns.

Standard Deviation (σ) (SD)

It’s the statistical return measuring method. It actually measures the deviation of returns from their mean value. In Mutual Funds, Standard Deviation  is used to measure the possible deviation in returns from its historical mean value.

Assume that a Mutual Fund with an Average Rate of Return of 12%. And a Standard Deviation of 3%. Then,  this Mutual Fund has the possibility of giving returns which will vary from 9% – 15%.

So, it is most obvious that, risk taking investors will prefer to choose funds with high Standard Deviation (SD). And risk averse, the funds with low SD.

Sharpe Ratio

One of the most popularly considered and used indicators to measure, Risk Vs Return is Sharpe Ratio. It was developed by Nobel Laureate William F.Sharpe. Hence is known as Sharpe Ratio.

Each investment in the Mutual Fund Portfolio comes with its own degree of risk. Returns should always be in proportion to the amount of risk taken by any investment. Only such investments are worth buying.

Sahrpe Ratio measures the excess return per unit of risk taken over the risk-free return. Here, risk-free return is the return given by risk-free instruments like Treasury Bills and Government Bonds

Sharp Ratio (S) = (Mean Portfolio Return-Risk Free Rate) /Standard Deviation of the Portfolio Return


(S) = rp – rf /σp

The Sharpe Ratio tells, how well the Mutual Fund has performed in proportion to the risk taken by it.

The higher the Sharpe Ratio, the better would be the ‘risk-adjusted- return’ of the Mutual Fund Portfolio

A good mutual fund is one which gives better returns than its peers for the same kind and amount of risk taken.

Loads and Charges

As said by the American Science Fiction Writer and Novelist, “Nothing of Value Free…..”, applies to Mutual Funds also. As an investor, it is very important to know the charges levied by the Mutual Funds. Less or more, directly or indirectly all those Fund Managing and Distributing expenses are collected from the investors anyhow. But, where the care should be taken is to select the Mutual Fund that charges less.

There are two types of fee that an investor need to pay as one time payment. They are broadly,


Entry Load

This load is levied at the time of buying the Mutual Fund Units. Actually, this entry load is collected by selling the units at a higher price than the existed unit price. So, the purchasing price hikes. But, this load has been abolished by SEBI in August 2009. So, no need of worrying about it.

Exit Load

This load is a factor of the holding period. If an investor stays invested till the end of the holding period, as mentioned in scheme related documents, it is exempted. No exit load is charged.

Before the holding period, it will be charged at the rate as mentioned in the scheme related documents. Usually, the percentage of charging varies from 0.5% – 3%. And, this charge is collected by the fund, by buying back the units at the lower than the current NAV.

Hence, if the investor is not sure about the holding period, better to choose a scheme with lower exit load.


Transaction Charges

These are also one time charges, to be paid by the investor at the time of purchasing the scheme. These are collected by the fund to pay to the intermediary /distributor. Hence, is also known as a Sales Load.

This fee is applicable for the investment amount of over Rs.10,000/-.

Rs.100/- for the SIP commitment of Rs. 10,000/- or above. These charges are deducted over 4 installments starting from the 2nd installment to 5th installment.

Recurring Charges

These expenses are charged on a daily basis and is deducted from the net asset value. The daily NAV is declared after deducting /adjusting these expenses. There are certain guidelines and mutual funds can’t charge more than the stipulated fee structure.

Even though, the fee structure is regulated, it varies based on the Net Assets of the Mutual Fund. More the net assets held by the fund, less are the recurring expenses and vice versa.

Expense Ratio

When you come up with Mutual Funds of similar nature, the next step is to consider their expense ratios. It’s better to choose the fund with low expense ratio. This will benefit you in the long run.

The whole fixed expenses of the Mutual Fund are spread out equally over the investors. In the case of funds with higher asset base, these expenses are spread over the large number of investors. Hence, the higher is the Assets Under Management, the lower is the ‘Expense Ratio’ or ‘Expense to Assets Under management Ratio’.

So, it is advisable to choose funds with high ‘Assets Under Management (AUM)’, and avoid the funds with less Asset Base /Assets Under Management.

Portfolio Turnover Ratio

The total cost incurred by the scheme is a function of the turnover ratio. The greater the ratio, the more is the cost charged by the fund. So, a fund with the lower turnover ratio is preferable over the fund with a higher turnover ratio.