MONEY MULTIPLYING NEWS

LIFE INSURANCE

Supercharge Your Financial Wealth with High Protection Unit Linked Plans: Secure Growth, Maximize Protection

WHAT ARE HIGH PROTECTION UNIT LINKED INSURANCE PLANS?

These plans offer policyholders the dual benefit of financial protection and the potential for wealth creation by investing a portion of the premium in various market-linked instruments. The “high protection” aspect emphasizes robust life insurance coverage, while the unit linked component allows for dynamic investment growth based on market performance.

Q. WHAT ARE THE REASONS FOR INVESTING IN HIGH PROTECTION UNIT LINKED INSURANCE PLANS?

ANS. Investing in High Protection Unit Linked Insurance Plans can be a strategic decision for several reasons:

THE INDIA GROWTH STORY

According to the Morgan Stanley Research, India is only beginning to start a decade of tremendous development. The economy will overtake Germany and Japan to become the third largest in the world by 2027. Simultaneously, the stock market is expected to finish this decade ranked third globally.

• The “Make in India” campaign encourages domestic and multinational companies to design and produce products in the country, increasing production capacity, job creation, and FDI.
• The Government is spearheading initiatives under Ease of Doing Business and Reducing Compliance Burden.
• India tops remittance flows at USD 125 bn in 2023: World Bank.

GLOBAL EQUITY MARKET PERFORMANCE VS INDIA

MORE REASONS TO GO FOR HIGH PROTECTION UNIT LINKED INSURANCE PLANS

• High Coverage upto 100x with market linked returns
• Capital Guarantee Option available
• Inbuilt Comprehensive Protection Riders such as -

Permanent & Total disability, Critical Illness, Accidental Death, etc. Available.

• Liquidity

i. Partial Withdrawal allowed after 5 year lock in period

ii. Systematic withdrawals are also allowed in a structured manner

Let’s understand the systematic withdrawals option with an example

Naman at the age of 35 decided to invest Rs. 2 lacs/annum for 10 years in ICICI Pru Protect N Gain. For a policy with term of 40 years, he wants income from the 11th year itself.

HUGE LUMPSUM FOR THE LEGACY

The lumpum option is a flexibility to withdraw and end the plan with ROP+ at any time post completion of PPT tenure.

• Income and Maturity returns can increase as Indian equity markets continue to grow
• Customer can choose to take a lump sum at any point after completion of 5 years and end the policy

Let us understand lumpsum option with an example

COST EFFICIENCY

GET BACK MORE THAN ALL YOUR CHARGES

• 2X or 3X return of Mortality charges.
• Return of Total of Fund Management Charges.
• 2X return of Premium Allocation Charges.
• Loyalty additions and Fund Boosters.
• Return of Investment Guarantee Charge.

EASE OF BUYING WITH NO PHYSICAL MEDICAL & INCOME PROOF*

High Protection Unit Linked Insurance Plans available

• TATA AIA Param rakshak PRO
• HDFC Life Smart Protect Plan
• Bajaj Allianz Invest Protect Goal
• Kotak T.U.L.I.P
• ICICI Prudential Protect N Gain

LET’S REVIEW THE HISTORICAL FUND PERFORMANCE OF ABOVE PLANS

Fund Performance as on 20th September, 2024

“Secure your future with High Protection Unit Linked Life Plans, where investment potential meets comprehensive protection.”

FIXED INCOME

The next meeting of the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC), scheduled from October 7 to 9, 2024, comes at a critical juncture. This will be the first meeting under a newly constituted committee, as the term of the current external members has expired. Their replacements will join the MPC to face several pressing macroeconomic variables, with inflation at the forefront. However, alongside the inflationary outlook, the situation presents a strategic investment opportunity, particularly in long-term duration bonds.

EASING INFLATION: A KEY FOCUS FOR THE NEW MPC

Currently, inflation appears to be trending downward. Headline inflation (CPI) for August 2024 came in at 3.65%, while core inflation, which excludes volatile components such as food and fuel, was reported at 3.4%. These figures are well below the upper limit of the RBI’s 4% target, signaling a moderation in inflationary pressures.

Several factors are driving this easing trend in inflation:

• Favorable Monsoon and Agricultural Output:

? Monsoon Performance: The monsoon season in 2024 has been stronger than the Long Period Average (LPA), which is critical for India’s agricultural output. A favorable monsoon usually leads to improved crop yields, and this year, the area under cultivation for the kharif crop is marginally higher compared to last year.

? Reservoir Storage Levels: Reservoir storage levels are higher than historical averages, ensuring adequate water supply for irrigation. This reduces the risk of supply-side food inflation, especially for key staples.

? Localized Weather Risks: While overall monsoon performance has been positive, certain regions have experienced excessive rainfall, which could affect the production of vegetables and some crops. While this poses a small risk to inflation, the overall outlook remains positive.

• Easing Crude Oil Prices:

? Global Oil Price Decline: Global crude oil prices have softened recently, leading to lower domestic fuel costs. Since fuel prices directly impact transportation and manufacturing, lower oil prices help reduce cost-push inflation in the economy. The moderation in oil prices will likely keep inflation in check in the coming months.

Given these factors, inflation for FY25 is projected to remain within the RBI’s forecast of 4.5%. This easing inflationary environment provides the new MPC with a comfortable buffer, allowing them to focus on other macroeconomic objectives, such as supporting economic growth.

BOND MARKET RESPONSE: NARROWING SPREAD INDICATES RATE CUT EXPECTATIONS

The bond market has already begun to anticipate a shift in monetary policy, with expectations of potential rate cuts by the RBI. This is reflected in the narrowing spread between the RBI’s repo rate and the 10-year government security (G-Sec) yield.

• Historical Spread: Over the past two decades, the average spread between the repo rate and the 10-year G-Sec yield has typically been around 100 basis points (1 percentage point). This spread serves as a risk premium for holding long-term government bonds.
• Current Spread: As of now, the repo rate stands at 6.5%, while the 10-year G-Sec yield is approximately 6.8%, resulting in a spread of just 30 basis points (bps). This is well below the historical average and indicates that the bond market has already priced in future rate cuts.

The bond market’s expectations create a favorable environment for long-term bond investors. With the likelihood of rate cuts, yields on long-duration bonds are expected to decline further, leading to price appreciation for existing bonds. This makes it an optimal time to invest in long duration bonds, as bondholders stand to gain from both interest income and capital appreciation.

REAL INTEREST RATES: FAVORABLE CONDITIONS FOR BOND INVESTMENTS

India’s real interest rate, which adjusts the nominal interest rate for inflation, plays a crucial role in determining the attractiveness of fixed-income investments. At present, the real interest rate is comfortably positive:

• Repo Rate vs. Inflation: With the current repo rate at 6.5% and the RBI’s inflation projection for FY25 at 4.5%, the real interest rate stands at 2 percentage points (6.5% - 4.5%).
• 1-Year T-Bill Yield: Similarly, the 1-year Treasury Bill yield is around 6.79%. After adjusting for inflation, the real yield is 2.29 percentage points, which is quite high for a developing economy.

WHY THIS IS THE BEST TIME TO INVEST IN LONGDURATION BONDS

For fixed-income investors, especially those focused on long term bonds, the current environment presents a compelling investment opportunity. Here’s why:

Anticipated Rate Cuts and Bond Market Dynamics: As the bond market has already priced in expectations of rate cuts, long-term bond yields are likely to decline further as the RBI reduces rates. Lower yields translate into higher bond prices, particularly for long-duration bonds, which are more sensitive to interest rate changes. Investing in long-duration bonds now allows investors to lock in higher yields before the anticipated rate cuts materialize.

• Attractive Real Interest Rates:

India’s real interest rates are currently positive and on the higher side for a developing economy. This means that investors can earn inflation-adjusted returns that are superior to those in many other asset classes. With inflation projected to remain under control, long-term bonds offer a safe and attractive return profile.

• Price Appreciation Potential:

When interest rates are cut, bond prices typically rise, especially for long-term bonds, which are more sensitive to rate changes. Investors who buy bonds now at relatively higher yields will benefit from price appreciation when rates are lowered, alongside the steady interest income that these bonds provide. This creates a dual advantage for investors: capital gains from rising bond prices and regular income from higher yields.

• Reduced Inflationary Pressure:

With inflation expected to remain within the RBI’s target of 4.5% for FY25, the risk of inflation-driven rate hikes is low. This provides a stable environment for bond investors, as inflationary pressures are not likely to erode the value of their returns in the near term. The combination of low inflation and high real interest rates creates a perfect storm for long-term bond investments.

• Global Economic Uncertainty:

With global economic uncertainty, including potential volatility in equity markets and geopolitical risks, long-term bonds offer a safe haven for investors seeking stability. Bonds, especially government securities, provide a fixed return and lower risk compared to other asset classes, making them an attractive option for conservative investors.

CONCLUSION: A STRATEGIC OPPORTUNITY FOR LONG-TERM BOND INVESTORS

The upcoming MPC meeting and the current macroeconomic landscape present a prime opportunity for investors to capitalize on long-duration bonds. With inflation showing an easing bias and bond markets already pricing in future rate cuts, this is an ideal time to lock in long-term bonds at higher yields. As the RBI potentially lowers rates to stimulate growth, long-term bondholders stand to benefit from both price appreciation and steady interest income.

India’s real interest rates are high for a developing economy, and inflationary pressures are under control, making long duration bonds an attractive investment option. For wealth managers and investors looking for stable, long-term returns with the potential for capital gains, this is the right time to invest in bonds before the anticipated rate cuts take full effect.

In summary, the current bond market dynamics, coupled with the easing inflationary environment, make long-term bonds a highly strategic investment for those seeking to maximize returns in a low-risk environment. The conditions are aligned for significant gains, and investors who act now can lock in advantageous positions as the bond market continues to respond to future rate cuts by the RBI.

MUTUAL FUNDS

Athematic fund is a type of mutual fund that focuses on investing in companies based on specific themes or trends. These themes could include global trends like technology, environmental sustainability, or local opportunities such as infrastructure development. The key aspect of a thematic fund is that it targets multiple sectors related to a single theme, offering investors exposure to companies that are expected to benefit from that theme in the future.

DIFFERENCE BETWEEN THEMATIC AND SECTORAL FUNDS

While both thematic and sectoral funds focus on specific areas, they differ in terms of investment scope:

• Thematic Fund: Invests across multiple sectors that align with a particular theme. For example, a “green energy” thematic fund may invest in companies involved in renewable energy, electric vehicles, and energy storage. The focus is broader, aiming to capitalize on a long-term trend that cuts across different industries.
• Sectoral Fund: Focuses solely on one sector, such as pharmaceuticals, banking, or IT. The risk is concentrated in a single industry, and the performance depends heavily on how that specific sector fares.

COMPARATIVE TABLE: THEMATIC VS SECTORAL FUND

Why Thematic Funds are Gaining Focus

Since 1st January,2024 to 31st August,2024, thematic funds have captured significant attention. According to industry data, thematic & Sectoral Fund saw 30 NFOs, where during an NFO ?.57,631.66 crore investments were raised as of August 2024 [Source: ACEMF , August,24]. The growing interest stems from:

• Sectoral Opportunities: Themes like manufacturing, defense, and infrastructure have become investment favorites due to government initiatives like the Production Linked Incentive (PLI) scheme and the ‘China+1’ strategy [Source: Ministry of Finance, India, August 2024]. For instance, manufacturing thematic funds alone received ?14,953 crore, or 26% of the total inflows.
• Performance: Thematic funds focusing on infrastructure and defense delivered average 63% returns of over % in the last 12 months, which has led to renewed interest in such niche investments.
• Economic Growth Prospects: As India continues to focus on building domestic capacity in manufacturing, defense, and renewable energy, these themes have become highly attractive for long-term investors.

Who Should Invest in Thematic Funds?

Thematic funds are best suited for experienced investors who:

• Have a high-risk tolerance.
• Understand macroeconomic and policy trends.
• Have a well-diversified portfolio and are looking for tactical, short-term opportunities.
• Are willing to stay invested for at least 5-10 years.

Risk Profile Allocation in Thematic Funds

Here’s how a 100% investment portfolio could be allocated to thematic funds, depending on the investor’s risk profile:

Recommended Thematic Fund : Take list of Funds from MF Research

GENERAL INSURANCE

Presenting a New Product from Manipal Cigna Health Insurance Co. Ltd - “Manipal Cigna SARVAH”. This specialized insurance plan is designed to cater to the unique health needs of ?BHARAT”. They understand the importance of your health and the need for comprehensive insurance that truly meets your expectations. That’s why Manipal Cigna presents Sarvah Health Insurance, a complete health solution with three distinct plan options:

1. MANIPAL CIGNA SARVAH - PRATHAM
2. MANIPAL CIGNA SARVAH- UTTAM
3. MANIPAL CIGNA SARVAH - PARAM

This plan is designed to offer the right level of coverage to suit your needs. Whether you’re seeking basic care or comprehensive benefits, Sarvah has you covered. With Sarvah, you can have peace of mind knowing that Manipal Cigna is with you, supporting you every step of the way.

HIGHLIGHTS OF THE PLAN

MANIPAL CIGNA SARVAH PRATHAM- Begin your Journey with Confidence

• Hospitalization coverage up to 3cr for 4 Major Illnesses.
• Sarathi* that reduces your waiting period to 30 days.
• Gullak* Benefits that guarantees 100% increase in the base SI, irrespective of claim
• Refill your policy for restoring* the SI even for related and unrelated illnesses.
• Surplus* Benefits that ensure additional 100% of SI from day 1 for the first claim
• Protect your family with personal accident cover* up to 3 Cr.
• No Zonal co-pay worries, ensuring faster recovery in the city of your choice.
• Get up to 7.5% discount when you renew your policy and up to 20% discount just by walking.

MANIPAL CIGNA SARVAH- UTTAM - A Health Insurance Plan to ensure you are stress-free in major illnesses.

• Anant* Care with unlimited hospitalisation coverage for 4 Major Illnesses.
• Sarathi* that reduces your waiting period to 30 days.
• Gullak* Benefits that guarantees 100% increase in the base SI, irrespective of claim
• Unlimited restoration* of SI even for related and unrelated illnesses.
• Maternity and Newborn hospitalisation and expenses* covered.
• Protect your family with personal accident cover* up to 3 Cr.
• No Zonal co-pay worries, ensuring faster recovery in the city of your choice.
• Surplus* Benefits that ensure additional 100% of SI from day 1 for the first claim.
• Get upto 2.5% discount when you renew your policy and upto 20 % discount just by walking.

MANIPAL CIGNA SARVAH - PARAM - A Health Insurance Plan that doesn’t make you wait at all

• Tatkal Benefit that ensures you have absolutely Zero Waiting Period.
• Gullak* Benefits that guarantees 100% increase in the base SI, irrespective of claims.
• Unlimited restoration* of SI even for related and unrelated illnesses.
• Protect your family with personal accident cover* up to 3 Cr.
• No Zonal co-pay worries, ensuring faster recovery in the city of your choice.
• Surplus* Benefits that ensure additional 100% of SI from day 1 for the first claim.
• Get upto 2.5% discount when you renew your policy and upto 20 % discount just by walking.

*Optional Cover on payment of additional premium

FEATURES COMPARISON OF THE PLAN

How much does it Cost - Few Examples

Disclaimer: Bajaj Capital Limited (‘BCL’) has taken due care and caution in presenting factually correct data contained herein above. While BCL has made every effort to ensure that the information/data being provided is accurate. BCL does not guarantee the accuracy, adequacy or completeness of any data/information in the publication and the same is meant for the use of the recipient and not for circulation. Readers are advised to satisfy themselves about the merits and details of each investment scheme, before taking any investment decision. BCL shall not be held liable for any consequences, legal or otherwise, arising out of use of any such information/ data and further states that it has no financial liability whatsoever to the recipient/ readers of this publication. Neither BCL nor any of its directors/ employees/ representatives accept any liability for any direct or consequential loss arising from the use of data/ information contained in the publication or any information/ data generated from the publication. Nothing contained in this publication shall constitute or be deemed to constitute a recommendation or an invitation or solicitation for any product or services. Any dispute arising in future shall be, subject to the Court(S) at Delhi. Views given in the articles are the personal views of the contributors and not that of the company. Readers are advised to go through the respective product brochure/ offer documents before making any investment decisions. Disclaimer: The rates of interest are applicable as on the data mentioned herein above. The rate may be revised at the sole discretion of the respective companies inviting the Fixed Deposits without further notice. Printed by, Rajiv Wadehra, Published By, Raji Wadehra on behalf of Bajaj Capital Investment Centre Limited, Bajaj House, 97 Nehru Place, New Delhi - 110019, and Printed at Sundeep press C-105/2, Naraina, Industrial Area Phase - New Delhi - 110028, and Published at Bajaj House,97 Nehru Place, New Delhi - 110019, Editor-Rajiv Wadehra (CIN: U0000DL1988PLC039417))