Description
Disclaimer: Copyright infringement not intended.
Context
- Groww Mutual Fund has introduced India's first Nifty Non-Cyclical Consumer Index Fund, marking a significant milestone in the country's investment landscape.
|
What Are Non-Cyclical Stocks:
- Non-Cyclical stocks are resilient stocks that perform well regardless of economic instability.
- They cater to daily necessities like food, LPG, power, etc., prioritizing consumer needs and essential services.
Understanding the Difference between Cyclical Stocks vs. Non-Cyclical Stocks:
Cyclical Stocks:
- Directly impacted by economic changes, dependent on business cycle fluctuations.
- Season-specific demand influences stock prices.
- Buying during off-seasons and selling during high-demand periods maximizes profits.
Non-Cyclical Stocks:
- Products in continuous demand, irrespective of economic cycles.
- Regular goods like food and water form daily necessities.
- Less affected by economic instability, offering stability and consistent returns.
Final Words:
- Non-Cyclical stocks, also known as defensive stocks, remain resilient despite economic fluctuations.
- Utility companies and essential services exemplify non-cyclical stocks, ensuring continuous demand.
- Both cyclical and non-cyclical stocks require thorough research and carry inherent risks and returns.
|
India's first Nifty Non-Cyclical Consumer Index Fund
Objective and Strategy:
- The fund mirrors the performance of the Non-Cyclical Consumer Index–TRI, aiming for long-term capital growth.
- Its strategy involves investing in securities of the Nifty Non-Cyclical Consumer Index, maintaining proportional weightage.
Investment Options:
- Investors can initiate a Systematic Investment Plan (SIP) with a minimum investment of Rs 100, with subsequent increments in multiples of Re 1.
- Lump sum investments are accepted with a minimum of Rs 500, followed by increments in Re 1 units.
Index Composition and Rationale:
- The index consists of leading stocks from consumer sectors such as Fast-Moving Consumer Goods (FMCG), Textiles,
- Selection criteria prioritize companies with substantial market capitalization, reflecting established consumer brands.
Suitability for Investors:
- This fund caters to investors seeking consistent wealth accumulation by tapping into the growth potential of renowned consumer brands.
- The focus on non-cyclical sectors offers stability and resilience amid economic fluctuations.
Asset Allocation:
- The fund predominantly allocates 95-100% of its assets in equities and equity-related securities of companies involved in or benefiting from consumption activities.
- A minor portion, between 0-5%, may be allocated to debt instruments or money market securities.
Exit Load:
- An exit load of 1% applies to units redeemed or switched within 30 days from the date of allotment.
- No exit load is applicable if units are redeemed or switched after the initial 30-day period.
|
PRACTICE QUESTION
Q. Which of the following statements accurately describes the characteristics of Cyclical and Non-Cyclical Stocks?
a) Cyclical stocks experience consistent demand throughout economic cycles, while Non-Cyclical stocks are directly influenced by seasonal fluctuations.
b) Cyclical stocks are resilient to economic changes and offer stable returns, while Non-Cyclical stocks are impacted by business cycle fluctuations.
c) Cyclical stocks are directly impacted by economic changes and experience fluctuations in demand based on business cycles, while Non-Cyclical stocks exhibit continuous demand regardless of economic cycles.
d) Cyclical stocks are immune to seasonal demand variations, while Non-Cyclical stocks are heavily influenced by off-season fluctuations.
Answer:
c) Cyclical stocks are directly impacted by economic changes and experience fluctuations in demand based on business cycles, while Non-Cyclical stocks exhibit continuous demand regardless of economic cycles.
|
SOURCE: ECONOMIC TIMES
