Board of Directors of the Company, has approved the proposal to buyback of not exceeding 2,02,81,009 equity shares (representing 7.87% of the paid-up share capital of the Company) at a price of Rs. Rs. 152/- per equity share
Nivesh View
As per shareholding data available in FY 2017-18 annual report, acceptance ratio comes around 15% for retail shareholders.*
*Retail shareholders are classified as the one’s who hold shares of market value upto 2 lakhs on the record date.
Other Information about the Buyback
• The Entire procedure might take approximate 3-4 months. • Record date for the buyback is yet to be announced by the company
Disclaimer: This document has been prepared by IndiaNivesh Securities Limited (“INSL”), for use by the recipient as information only and is not for circulation or public distribution. INSL includes subsidiaries, group and associate companies, promoters, employees and affiliates. INSL researches, aggregates and faithfully reproduces information available in public domain and other sources, considered to be reliable and makes them available for the recipient, though its accuracy or completeness has not been verified by INSL independently and cannot be guaranteed. The third party research material included in this document does not represent the views of INSL and/or its officers, employees and the recipient must exercise independent judgement with regard to such content. This document has been published in accordance with the provisions of Regulation 18 of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is not to be altered, transmitted, reproduced, copied, redistributed, uploaded or published or made available to others, in any form, in whole or in part, for any purpose without prior written permission from INSL. This document is solely for information purpose and should not to be construed as an offer to sell or the solicitation of an offer to buy any security. Recipients of this document should be aware that past performance is not necessarily a guide for future performance and price and value of investments can go up or down. The suitability or otherwise of any investments will depend upon the recipients particular circumstances. INSL does not take responsibility thereof. The research analysts of INSL have adhered to the code of conduct under Regulation 24 (2) of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is based on technical and derivative analysis center on studying charts of a stock’s price movement, outstanding positions and trading volume, as opposed to focusing on a company’s fundamentals and, as such, may not match with a report on a company’s fundamentals. Nothing in this document constitutes investment, legal, accounting and/or tax advice or a representation that any investment or strategy is suitable or appropriate to recipients’ specific circumstances. INSL does not accept any responsibility or whatever nature for the information, assurances, statements and opinion given, made available or expressed herein or for any omission or for any liability arising from the use of this document. Opinions expressed are our current opinions as of the date appearing on this document only. The opinions are subject to change without any notice. INSL directors/employees and its clients may have holdings in the stocks mentioned in the document. This report is based / focused on fundamentals of the Company and forward-looking statements as such, may not match with a report on a company’s technical analysis report Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report: Dharmesh Kant Following table contains the disclosure of interest in order to adhere to utmost transparency in the matter:
INSL, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. This information is subject to change, as per applicable law, without any prior notice. INSL reserves the right to make modifications and alternations to this statement, as may be required, from time to time. Research Analyst has not served as an officer, director or employee of Subject Company One year Price history of the daily closing price of the securities covered in this note is available at www.nseindia.com and www.economictimes.indiatimes.com/markets/stocks/stock-quotes. (Choose name of company in the list browse companies and select 1 year in icon YTD in the price chart)
Posted by Mehul Kothari | Published on 14-NOV-2019
“XYZ company announces a buyback of its shares”. You must have seen or read this headline multiple times in the last couple of years. Especially by companies from the IT or technology industry. According to reports, in the financial year 2018, buyback offers worth Rs. 50,000 crores were made in the Indian markets.
Have you wondered what is share buyback and what are the technicalities involved with it? Or if you should give up your shares during buyback offers? Then read on and get all your queries resolved.
What is share buyback?
Buyback of Shares – Meaning:
A share buyback is a process through which a listed company uses its money and repurchases its own shares from the market. It is the opposite of an IPO (Initial Public Offer). Stock repurchase is also seen as a way for the company to re-invest in itself. Once the stock buyback is complete, they are absorbed and cease to exist. There are two ways in which stock buyback can take place:
Tender Offer: In this buyback channel, the company offers to buy back a certain number of stock at a quoted price. The buyback is done directly from the shareholders.
Open Market: The open market buyback takes place through the secondary market (stock exchange). The resolution (special or board) needs to specify the maximum price for the buyback.
2. Buyback of Shares – Regulations:
SEBI has laid down the following guidelines for buyback of shares:
It cannot be more than 25% of the total paid-up capital value and free reserves held by the company. It needs to be approved by the shareholders through a special resolution.
If the buyback value does not exceed 10% of the total paid-up capital value and free reserves held by the company, it necessitates only a board resolution.
Why do companies offer stock buyback schemes?1. Surplus cash but lack of investible projects
This is one of the primary reasons behind stock repurchase by companies. Idle cash reserves come with a cost. Matured businesses do not need to invest exorbitantly in research, development or other such aspects. Also, holding on to unused equity funding results in ownership dilution without any good reason. Hence, companies prefer to buy-back their own shares.2. Tax-efficiencies
Buybacks usually happen at a premium as compared to the market price. Companies prefer this route to reward shareholders rather than paying our dividends due to the tax implications. Dividends attract 15% DDT (Dividend Distribution Tax) for the companies as well as 10% tax in the hands of shareholders if the dividend income exceeds Rs. 10 Lakhs. Hence, earnings through buyback become more tax efficient for both the parties, even after considering the taxes applicable.3. Enhanced valuations
Buybacks are associated with enhanced share valuations as a result of an improved PE multiple. Stock repurchase leads to a reduction in the number of outstanding shares and hence, capital base. This, in turn, improves the value of EPS (Earning per Share) as the same amount of dividend is now divided between lesser shareholders. The ROE (Return on Equity) also goes up as the cash assets on the Balance Sheets come down.4. Signal to the market
Stock buybacks are also used to send indicators to the market. It signals that the company has great confidence in itself. Hence it is ready to repurchase its own shares (mostly at a premium) as it feels that the company is undervalued currently in the market. For instance, when the company management is highly optimistic about the future prospects but the stock price still reflects bearish sentiments based on past performance only.
In some cases, promoters can also use the buyback channel to tighten their hold on the company. This is especially true when the shareholding is highly diluted or is in the hands of individuals or investors who do not have the best interest of the company in mind.
How to evaluate stock buyback offers?
Now you know what is share buyback and the reasons why companies offer them. But the fundamental question remains – what should be your stance in case of buyback offers? Should you hold your stock or give them up? These pointers can help you take the final decision:1. Offer Price and buyback quantum
Buybacks are lucrative only when they are offered at a significant premium amount. The offer price must be substantially above the current market price to make it worthwhile for the investor. Also, the quantum of the share repurchase amount should be substantial.
2. Look at the tax implications
Till recently, shareholders had to pay capital gains tax on their buyback earnings. However, with the introduction of buyback tax for listed companies, investors are now exempted from the same. Companies will now have to pay 20% buyback tax. This move has been done as the Government observed that more companies were distributing their profits through the buyback channel rather than dividend as the latter attracted DDT (Dividend Distribution Tax). Note: The buyback tax is not applicable to companies who had announced their buyback schemes prior to 5th July 2019.3. Promoter Participation
Promoters cannot participate in the buyback process if it is being done through the open market. However, they are allowed in case of tender offer. In case of participation by the promoter, there is usually a positive movement for the stock price in the long-term.
Final Words
Buyback can be rewarding for both parties (company as well as investors). As an investor, it is important for you to understand the implications of each buyback offer and decide wisely. You should keep an eye out for the upcoming buyback of shares in 2019 and corporate news around the same. In case you feel that you are not able to decide on your own, you can always reach out to an expert like IndiaNivesh.
Indiaivesh has been providing excellent financial solutions to investors since the last 11 years. It offers a wide range of products – broking, distribution, equities, strategic investments, investment banking as well as wealth management. With its “client-first” approach, skilled and experienced team members and state-of-the-art research and technological capabilities, you can be rest assured that your financial interests are in safe hands.
Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
)
Posted by Mehul Kothari | Published on 15-NOV-2019
Mutual funds are the most popular investment avenue among investors. It can be justified from the fact that the mutual fund industry has added a whopping 3 trillion to their asset base in 2018 and the uptrend may continue in the coming years.
There are many types of mutual funds available in the market and one of them is Index Funds. They offer an easy, diversified and low-cost way to invest in the stock market. In this article, you will learn about the Index Funds in detail.
Let us begin the article by learning what is an index fund?
What is an Index Fund?
Investors always seek to take advantage of diversifying their portfolio across different asset classes. To do so, index funds are the most popular because they imitate the portfolio of an index like the Sensex or the Nifty. This fund is constructed in such a way that it matches the performance of the financial market index. An investor who has bought an index fund would experience the price moment exactly in sync of the quoted value of the Sensex or Nifty, depending on the fund. Therefore, these funds ensure the performance exactly as the index that is being tracked. One of the main benefits of these funds is its low expense ratio.
Let us now learn how does an index fund work?
How Does an Index Fund Works?
Like mentioned earlier, Index funds basically track the performance of the index such as Nifty. When you purchase this fund, your portfolio will have 50 stocks in the same proportion that comprise in the Nifty. Therefore, an index represents a group of securities of a market segment. In India, the most popular Indices are NSE Nifty and BSE Sensex. The index funds are not actively managed funds because they replicate an index. In actively managed funds, the fund managers keep on looking for opportunities by researching and selecting new stocks. But in index funds, the managers just maintain the composition of an underlying benchmark.
In the case of actively managed funds, the aim is to beat its benchmark while in the case of index funds, the managers try to match the performance of the portfolio with that of the index. Even though the fund managers try their best to match the performance of index fund returns with their portfolio but still there can be some small difference. The index fund managers try to bring down the tracking errors so as to match the index fund returns with the portfolio returns.
Now coming to the most important question that who must invest in the low cost index funds. In this section, we will discuss the same.
Who Can Invest in Low Cost Index Funds?
If you want a predictable set of returns and do not want to take much risk, these low cost index funds are ideal for you. These funds will give you same set of returns as a particular index would. Also, if you want to keep yourself associated with equity funds but not with those funds that are actively managed and bear some risk, these funds are good for you to invest.
Therefore, the first thing to consider while investing in the low cost index funds is determining your financial goals and the amount of risk you are willing to take. In the long run, the performance of the index funds is very good.
Let us now learn how you can invest in the index funds?
How to Invest in Index Funds
Investing in Index Funds is very easy with IndiaNivesh Ltd. Just follow the below mentioned steps to invest in the index funds;
Visit the website - https://www.indianivesh.in/ and sign in.
Fill the amount and period of your investment.
Complete the hassle-free KYC process.
You can now invest in your preferred index fund amongst the many options available.
Before you invest in index funds, there are a few things that you must consider. Let us see what they are.
Things to Consider Before Investing in Index Funds
Risk Appetite
It is always advisable to mix and diversify your investments. Index funds are perfect for those who want to take fewer risks. You can reap higher benefits in these funds when the market is in bull mode. When the market enters the bearish mode, you may consider entering actively managed funds.
Returns
Index funds aim to replicate the performance of the underlying benchmark. If you are looking for decent returns in the long run, you can invest in the index funds. It is advisable to invest in those index funds that have minimum tracking error.
Cost Of Investment
The main benefit of investing in index funds is the lower expense ratio. The expense ratio of index funds is 0.5% or less while the expense ratio of actively managed funds is 1% to 2.5%. The funds with lower expense ratios always generate higher returns.
Financial Objectives
If you are looking to invest for your retirement or want to create long term wealth then index funds are ideal for you. These funds can generate good returns in the long run which would be of great assistance in your life after retirement.
Period of Investment
Index funds are known to give better returns over a long term of period. You must have the patience to stick to these funds and avoid taking any decision on the basis of short term fluctuations.
Taxation
On redemption of the index funds, the capital gains are taxable. Your holding period determines the rate of taxation. If the holding period is less than a year, the short term capital gains are taxable at 15%. And if the holding period is more than one year, the long term capital gains over Rs. 1 lakh is taxable at 10% with no benefit of indexation.
The above mentioned are the things that you must consider before investing in the best index funds available in the market. If you looking to invest in best index funds and need any assistance you can contact IndiaNivesh Ltd.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.)
MOIL Limited Buyback Offers Open Today
Nivesh View
As per shareholding data available in FY 2017-18 annual report, acceptance ratio comes around 15% for retail shareholders.*
*Retail shareholders are classified as the one’s who hold shares of market value upto 2 lakhs on the record date.
Other Information about the Buyback
• The Entire procedure might take approximate 3-4 months.
• Record date for the buyback is yet to be announced by the company
Disclaimer: This document has been prepared by IndiaNivesh Securities Limited (“INSL”), for use by the recipient as information only and is not for circulation or public distribution. INSL includes subsidiaries, group and associate companies, promoters, employees and affiliates. INSL researches, aggregates and faithfully reproduces information available in public domain and other sources, considered to be reliable and makes them available for the recipient, though its accuracy or completeness has not been verified by INSL independently and cannot be guaranteed. The third party research material included in this document does not represent the views of INSL and/or its officers, employees and the recipient must exercise independent judgement with regard to such content. This document has been published in accordance with the provisions of Regulation 18 of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is not to be altered, transmitted, reproduced, copied, redistributed, uploaded or published or made available to others, in any form, in whole or in part, for any purpose without prior written permission from INSL. This document is solely for information purpose and should not to be construed as an offer to sell or the solicitation of an offer to buy any security. Recipients of this document should be aware that past performance is not necessarily a guide for future performance and price and value of investments can go up or down. The suitability or otherwise of any investments will depend upon the recipients particular circumstances. INSL does not take responsibility thereof. The research analysts of INSL have adhered to the code of conduct under Regulation 24 (2) of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is based on technical and derivative analysis center on studying charts of a stock’s price movement, outstanding positions and trading volume, as opposed to focusing on a company’s fundamentals and, as such, may not match with a report on a company’s fundamentals. Nothing in this document constitutes investment, legal, accounting and/or tax advice or a representation that any investment or strategy is suitable or appropriate to recipients’ specific circumstances. INSL does not accept any responsibility or whatever nature for the information, assurances, statements and opinion given, made available or expressed herein or for any omission or for any liability arising from the use of this document. Opinions expressed are our current opinions as of the date appearing on this document only. The opinions are subject to change without any notice. INSL directors/employees and its clients may have holdings in the stocks mentioned in the document. This report is based / focused on fundamentals of the Company and forward-looking statements as such, may not match with a report on a company’s technical analysis report Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report: Dharmesh Kant Following table contains the disclosure of interest in order to adhere to utmost transparency in the matter:
INSL, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. This information is subject to change, as per applicable law, without any prior notice. INSL reserves the right to make modifications and alternations to this statement, as may be required, from time to time. Research Analyst has not served as an officer, director or employee of Subject Company One year Price history of the daily closing price of the securities covered in this note is available at www.nseindia.com and www.economictimes.indiatimes.com/markets/stocks/stock-quotes. (Choose name of company in the list browse companies and select 1 year in icon YTD in the price chart)
IndiaNivesh Securities Limited
Research Analyst SEBI Registration No. INH000000511
Corporate Office: Lodha Supremus, 17th Floor, Senapati Bapat Marg, Lower Parel (West), Mumbai - 400 013.
Registered Office: 601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai - 400 007.
Tel (Board): 022 6240 6240 | Fax 022 6240 6241
E-mail: research@indianivesh.in | Website: www.indianivesh.in
Previous Story
Share Buyback – Meaning & Upcoming Buyback of Shares
“XYZ company announces a buyback of its shares”. You must have seen or read this headline multiple times in the last couple of years. Especially by companies from the IT or technology industry. According to reports, in the financial year 2018, buyback offers worth Rs. 50,000 crores were made in the Indian markets. Have you wondered what is share buyback and what are the technicalities involved with it? Or if you should give up your shares during buyback offers? Then read on and get all your queries resolved. What is share buyback? Buyback of Shares – Meaning: A share buyback is a process through which a listed company uses its money and repurchases its own shares from the market. It is the opposite of an IPO (Initial Public Offer). Stock repurchase is also seen as a way for the company to re-invest in itself. Once the stock buyback is complete, they are absorbed and cease to exist. There are two ways in which stock buyback can take place: Tender Offer: In this buyback channel, the company offers to buy back a certain number of stock at a quoted price. The buyback is done directly from the shareholders. Open Market: The open market buyback takes place through the secondary market (stock exchange). The resolution (special or board) needs to specify the maximum price for the buyback. 2. Buyback of Shares – Regulations: SEBI has laid down the following guidelines for buyback of shares: It cannot be more than 25% of the total paid-up capital value and free reserves held by the company. It needs to be approved by the shareholders through a special resolution. If the buyback value does not exceed 10% of the total paid-up capital value and free reserves held by the company, it necessitates only a board resolution. Why do companies offer stock buyback schemes?1. Surplus cash but lack of investible projects This is one of the primary reasons behind stock repurchase by companies. Idle cash reserves come with a cost. Matured businesses do not need to invest exorbitantly in research, development or other such aspects. Also, holding on to unused equity funding results in ownership dilution without any good reason. Hence, companies prefer to buy-back their own shares.2. Tax-efficiencies Buybacks usually happen at a premium as compared to the market price. Companies prefer this route to reward shareholders rather than paying our dividends due to the tax implications. Dividends attract 15% DDT (Dividend Distribution Tax) for the companies as well as 10% tax in the hands of shareholders if the dividend income exceeds Rs. 10 Lakhs. Hence, earnings through buyback become more tax efficient for both the parties, even after considering the taxes applicable.3. Enhanced valuations Buybacks are associated with enhanced share valuations as a result of an improved PE multiple. Stock repurchase leads to a reduction in the number of outstanding shares and hence, capital base. This, in turn, improves the value of EPS (Earning per Share) as the same amount of dividend is now divided between lesser shareholders. The ROE (Return on Equity) also goes up as the cash assets on the Balance Sheets come down.4. Signal to the market Stock buybacks are also used to send indicators to the market. It signals that the company has great confidence in itself. Hence it is ready to repurchase its own shares (mostly at a premium) as it feels that the company is undervalued currently in the market. For instance, when the company management is highly optimistic about the future prospects but the stock price still reflects bearish sentiments based on past performance only. In some cases, promoters can also use the buyback channel to tighten their hold on the company. This is especially true when the shareholding is highly diluted or is in the hands of individuals or investors who do not have the best interest of the company in mind. How to evaluate stock buyback offers? Now you know what is share buyback and the reasons why companies offer them. But the fundamental question remains – what should be your stance in case of buyback offers? Should you hold your stock or give them up? These pointers can help you take the final decision:1. Offer Price and buyback quantum Buybacks are lucrative only when they are offered at a significant premium amount. The offer price must be substantially above the current market price to make it worthwhile for the investor. Also, the quantum of the share repurchase amount should be substantial. 2. Look at the tax implications Till recently, shareholders had to pay capital gains tax on their buyback earnings. However, with the introduction of buyback tax for listed companies, investors are now exempted from the same. Companies will now have to pay 20% buyback tax. This move has been done as the Government observed that more companies were distributing their profits through the buyback channel rather than dividend as the latter attracted DDT (Dividend Distribution Tax). Note: The buyback tax is not applicable to companies who had announced their buyback schemes prior to 5th July 2019.3. Promoter Participation Promoters cannot participate in the buyback process if it is being done through the open market. However, they are allowed in case of tender offer. In case of participation by the promoter, there is usually a positive movement for the stock price in the long-term. Final Words Buyback can be rewarding for both parties (company as well as investors). As an investor, it is important for you to understand the implications of each buyback offer and decide wisely. You should keep an eye out for the upcoming buyback of shares in 2019 and corporate news around the same. In case you feel that you are not able to decide on your own, you can always reach out to an expert like IndiaNivesh. Indiaivesh has been providing excellent financial solutions to investors since the last 11 years. It offers a wide range of products – broking, distribution, equities, strategic investments, investment banking as well as wealth management. With its “client-first” approach, skilled and experienced team members and state-of-the-art research and technological capabilities, you can be rest assured that your financial interests are in safe hands. Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing. )
Next Story
Index Funds – Investing in Low Cost Index Funds
Mutual funds are the most popular investment avenue among investors. It can be justified from the fact that the mutual fund industry has added a whopping 3 trillion to their asset base in 2018 and the uptrend may continue in the coming years. There are many types of mutual funds available in the market and one of them is Index Funds. They offer an easy, diversified and low-cost way to invest in the stock market. In this article, you will learn about the Index Funds in detail. Let us begin the article by learning what is an index fund? What is an Index Fund? Investors always seek to take advantage of diversifying their portfolio across different asset classes. To do so, index funds are the most popular because they imitate the portfolio of an index like the Sensex or the Nifty. This fund is constructed in such a way that it matches the performance of the financial market index. An investor who has bought an index fund would experience the price moment exactly in sync of the quoted value of the Sensex or Nifty, depending on the fund. Therefore, these funds ensure the performance exactly as the index that is being tracked. One of the main benefits of these funds is its low expense ratio. Let us now learn how does an index fund work? How Does an Index Fund Works? Like mentioned earlier, Index funds basically track the performance of the index such as Nifty. When you purchase this fund, your portfolio will have 50 stocks in the same proportion that comprise in the Nifty. Therefore, an index represents a group of securities of a market segment. In India, the most popular Indices are NSE Nifty and BSE Sensex. The index funds are not actively managed funds because they replicate an index. In actively managed funds, the fund managers keep on looking for opportunities by researching and selecting new stocks. But in index funds, the managers just maintain the composition of an underlying benchmark. In the case of actively managed funds, the aim is to beat its benchmark while in the case of index funds, the managers try to match the performance of the portfolio with that of the index. Even though the fund managers try their best to match the performance of index fund returns with their portfolio but still there can be some small difference. The index fund managers try to bring down the tracking errors so as to match the index fund returns with the portfolio returns. Now coming to the most important question that who must invest in the low cost index funds. In this section, we will discuss the same. Who Can Invest in Low Cost Index Funds? If you want a predictable set of returns and do not want to take much risk, these low cost index funds are ideal for you. These funds will give you same set of returns as a particular index would. Also, if you want to keep yourself associated with equity funds but not with those funds that are actively managed and bear some risk, these funds are good for you to invest. Therefore, the first thing to consider while investing in the low cost index funds is determining your financial goals and the amount of risk you are willing to take. In the long run, the performance of the index funds is very good. Let us now learn how you can invest in the index funds? How to Invest in Index Funds Investing in Index Funds is very easy with IndiaNivesh Ltd. Just follow the below mentioned steps to invest in the index funds; Visit the website - https://www.indianivesh.in/ and sign in. Fill the amount and period of your investment. Complete the hassle-free KYC process. You can now invest in your preferred index fund amongst the many options available. Before you invest in index funds, there are a few things that you must consider. Let us see what they are. Things to Consider Before Investing in Index Funds Risk Appetite It is always advisable to mix and diversify your investments. Index funds are perfect for those who want to take fewer risks. You can reap higher benefits in these funds when the market is in bull mode. When the market enters the bearish mode, you may consider entering actively managed funds. Returns Index funds aim to replicate the performance of the underlying benchmark. If you are looking for decent returns in the long run, you can invest in the index funds. It is advisable to invest in those index funds that have minimum tracking error. Cost Of Investment The main benefit of investing in index funds is the lower expense ratio. The expense ratio of index funds is 0.5% or less while the expense ratio of actively managed funds is 1% to 2.5%. The funds with lower expense ratios always generate higher returns. Financial Objectives If you are looking to invest for your retirement or want to create long term wealth then index funds are ideal for you. These funds can generate good returns in the long run which would be of great assistance in your life after retirement. Period of Investment Index funds are known to give better returns over a long term of period. You must have the patience to stick to these funds and avoid taking any decision on the basis of short term fluctuations. Taxation On redemption of the index funds, the capital gains are taxable. Your holding period determines the rate of taxation. If the holding period is less than a year, the short term capital gains are taxable at 15%. And if the holding period is more than one year, the long term capital gains over Rs. 1 lakh is taxable at 10% with no benefit of indexation. The above mentioned are the things that you must consider before investing in the best index funds available in the market. If you looking to invest in best index funds and need any assistance you can contact IndiaNivesh Ltd.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.)