SEPTEMBER 2022 | VOL.

16

THE
ORANGE
BOOK
Leverage your FINANCIAL QUOTIENT
 How to remain
resilient in
volatile times?
Market volatility is inevitable and unpredictable. It’s
a vulnerable time and making a wrong move could
wipe out previous gains and more. Hence, capital
preservation has become key during volatile times
like these.

It is important to not panic or act on impulse, as reacting

to short-term volatility may lead to permanent losses.

A capital preservation strategy is designed to protect the initial investment

amount over a defined period by combining investments in bonds and equities.

SEPTEMBER 2022 | VOL.16

 Do’s Don’ts
Investing for a long term reduces the
1 impact of volatility 1 Don’t try to time the market

Investing in a diversified portfolio

2 comprising Equities, Bonds and Gold,
2 Don’t over leverage
since they have low co-relation

Follow asset allocation strategy and Don’t let your emotions, fear or
3 invest as per your risk appetite
3 greed get the better of you

Review your investment plan

4 periodically but stay focussed on your
4 Don’t fall into the trap
investment goals of pessimism!

The ‘glass is half empty’ way of thinking!

People like to hear
that the world is full Bad news tends to
of problems HALF get more attention
EMPTY
Progress is a slow process
As humans, we tend to and hence seldom noticed.
treat fear & threat However, a setback
more urgently than happens quickly and
opportunities cannot be ignored

Market volatility can often trigger pessimism, impacting

judgement and potentially affecting long-term plans.
Hence, it is important to keep your calm and take an informed decision on
whether to stay the course or re-adjust your portfolio, if needed.

For assistance with your Banking needs:

Call your RM at 022 4440 0000 WhatsApp ‘Start’ to
(Express Relationship Banking Number) 86400 86400
Call us at 1860 120 7777

SEPTEMBER 2022 | VOL.16

Unearthing opportunities when
the market dips
When the market dips, the falling asset prices often cause insecurity in the minds of investors.
However, at the same time this opens up several opportunities. Let’s have a look at a few of
these:

Opportunity to BUY! Weeds out distortions

We are always excited to buy when there is a Many a times, market hype or excesses
“SALE”. The same happens when the market (bubbles) are created because of
dips – it’s a SALE. euphoria and herd behaviour, without
fundamentals having undergone any
So, if one has surplus liquidity, this is the specific improvements.
time to add more to one’s current
holdings – be in Mutual Such investments are
Funds*, Bonds, Portfolio exposed during such
Management Services market lows and asset
or other products at a prices get aligned to
much lower price. a more reasonable
level.

Teaches to Helps us
choose wisely re-think our
goals and priorities
Sometimes, a loss can
be the best teacher. It It’s always good to
teaches us to look at the review one’s portfolio,
investment products’ strategy, whether the market is in a
their fundamentals and understand upward or downward trend.
the sector in depth, rather than getting
overwhelmed by past performance. Such dips in the market teach us about our
actual ability to take risk. This learning can
Market dips teach us to choose be used to re-orient allocation towards
investments that can weather market various asset classes and goals and help
ups and downs. re-calibrate one’s investment horizon.
They also test one’s readiness for
financial emergencies.
*ICICI Bank Limited is a AMFI Registered Mutual Fund Distributor. Mutual Fund investments are subject to market
risk. Read all scheme related documents carefully. T&C Apply.
SEPTEMBER 2022 | VOL.16
 Nifty 50 over the years
20000

18000

16000

14000

12000

10000

8000
COVID-19 Pandemic
6000

4000

2000 Global Financial Crisis

Asia Financial Crisis Dot Com Bubble Burst

0

2022
1996
1997
1998
1999

2002
2003

2005
2006
2007

2009

2011
2012
2013
2014
2015
2016
2017
2018
2019
2008*
2000*
2001*

2004*

2010*

2020*
2021*
The years with * have the lowest /highest value of NIFTY as per the Bear / Bull Market
This data has been derived and compiled from: ACE MF

The above chart shows that in a growing economy, irrespective of the dips in the
market, long term investing is the key to success!

For assistance with your Banking needs:

Call your RM at 022 4440 0000 WhatsApp ‘Start’ to
(Express Relationship Banking Number) 86400 86400
Call us at 1860 120 7777

SEPTEMBER 2022 | VOL.16

Demystifying Mutual Funds
Mutual Fund Categorisation
As per SEBI guidelines, it is desirable that different schemes launched by a Mutual Fund company
are clearly distinct in terms of asset allocation, investment strategy, etc. This brings uniformity in
the characteristics of similar type of schemes launched by different Mutual Fund companies and
an investor is able to evaluate the different options available before taking an informed decision to
invest in a scheme.

Categorisation rationale

Enabling the right

scheme category
selection, as per Clarity on asset Reducing investor
objective allocation dissonance

Right risk return Peer scheme

expectation comparison

ICICI Bank Limited is a AMFI Registered Mutual Fund Distributor. Mutual Fund investments are subject to market risk.
Read all scheme related documents carefully. T&C Apply.
SEPTEMBER 2022 | VOL.16
 These schemes are broadly classified in the following groups:
Invest in equities and equity related
Equity Schemes instruments and seek long term growth
however, could be volatile in the short term

Invest in fixed income instruments,

bonds or other securities that have Debt Schemes
potential for income generation

Invest in equities, debt and other asset

Hybrid Schemes classes and seek to find balance between
growth and income

Focus on long-term planning such as

child's education and retirement, with
Solution Oriented
a lock-in period of 5 years Schemes

Comprise of ETFs/Index Funds/Fund of

Other Schemes Funds (Overseas/Domestic)

Equity Mutual Funds

Risk vs Return Stocks by Market cap Allocation across Market cap

Highest 500
Min. 65% Equity,
Max 30 stocks
Min. 65% Focused Fund Min. 80% Equity
251st
400 Stock Min. 65% Equity
SmallCap Sectoral/
onwards
Thematic
Value/Contra Fund
Min. 65% Equity, (Allocation to
strategy
Across market cap sector/theme min.
300
80%)
Flexicap
250 Dividend Yield
Fund
Min. 65%
ELSS (Tax**
Next
200 Saving u/s 80C)
101-250 Min. 75% Equity
MidCap
Stocks Min. 35% each Min. 25% each in
Large, Mid & Small cap
100
Large & Midcap Multicap
Top Min. 80% Strategy/Thematic
1-100
Stocks
LargeCap

Lowest 1

INVEST NOW
This data has been derived and compiled from: SEBI Circulars
ICICI Bank Limited is a AMFI Registered Mutual Fund Distributor. Mutual Fund investments are subject to market risk.
Read all scheme related documents carefully. T&C Apply.
**Tax Benefits are subject to amendments in tax laws from time to time. SEPTEMBER 2022 | VOL.16
 Debt Mutual Funds
Risk vs Return Maturity of Money Credit Quality Issuer Based
Market/Debt securities
Highest (duration & issuer agnostic) (duration & credit quality agnostic)

Over 7 Years Long Duration Credit Risk Gilt Funds

4-7 Years Medium to Long Duration Min. 65% in Min. 80% in
Corporate bonds G-Sec
3-4 Years Medium Duration
with AA & below
1-3 Years Short Duration rating Gilt 10Yr Constant Duration
Upto 1 Year Money Market Min. 80% in G-Sec with
6-12 months Low Duration Corporate Bond 10 year maturity

3-6 months Ultra Short Term Min. 80% in Banking & PSU
Upto 91 Days Liquid Corporate bonds
with AA+ and Min. 80% in debt
1 Day Overnight above rating of Banks, PSUs,
PFIs

Dynamic Bond Fund (invests across maturities, credit quality, issuer)

Lowest
Floating Rate Fund (min. 65% in floating rate debt securities, duration depends
on interest rate scenario)

INVEST NOW
This data has been derived and compiled from: SEBI Circulars

Hybrid Funds
Asset Allocation
Risk vs Other Asset Classes
Category Equity Debt
Return
(Eg. Gold etc.)
Highest
Aggressive Hybrid 65-80% 20-35% ---

40-60% 40-60% ---

Balanced Hybrid (No arbitrage)

Dynamic Asset Allocation/ Dynamic Dynamic ---

Balanced Advantage Fund

Multi Asset Allocation Min. 10% Min. 10% Min. 10%

Equity Savings Min. 65%

(partially hedged - arbitrage)
Min. 10% ---

Conservative Hybrid 10-25% 75-90% ---

Arbitrage Fund Min. 65%

(completely hedged - arbitrage)
Min. 35% ---
Lowest

INVEST NOW
This data has been derived and compiled from: SEBI Circulars
Invest Now Mutual Fund investments are subject to market risk.
ICICI Bank Limited is a AMFI Registered Mutual Fund Distributor.
Read all scheme related documents carefully. T&C Apply. SEPTEMBER 2022 | VOL.16
Solution Oriented Funds
Solution Oriented Funds design their portfolio to achieve a specific goal like retirement
planning and child’s education planning. They create an easy path for long-term financial
planning with objectives which may or may not require alteration in strategy with respect to
time. Basis the investment objectives, SEBI has divided solution oriented funds into two
sub-categories:
Retirement Fund
An open ended scheme with a lock-in for at least 5 years or
till retirement age, whichever is earlier.

Children’s Fund#
An open ended scheme with a lock-in for at least 5 years or
till the child attains the age of majority, whichever is earlier.
# investment only in Minor Account.

Index Funds/ ETFs

An open ended scheme replicating/ tracking a particular index with minimum 95% investment in
securities of that index. They are passively managed.

Index Funds
The securities included in the portfolio and their weights are the
same as that in the index

The fund manager does not rebalance the portfolio based on

their view of the market or sector

ETFs(Exchange Traded Funds)

An ETF is a marketable security that tracks an index, a
commodity, bonds, or a basket of assets like an Index Fund

The traded price of an ETF changes throughout the day like any
other stock, as it is bought and sold on the stock exchange

ETFs are listed on stock exchanges and units are compulsorily

held in a Demat mode

ICICI Bank Limited is a AMFI Registered Mutual Fund Distributor. Mutual Fund investments are subject to market risk.
Read all scheme related documents carefully. T&C Apply.
SEPTEMBER 2022 | VOL.16
Fund of Funds (Overseas/ Domestic)
An open ended Fund of Funds (FOF) scheme invests in an
underlying fund with minimum 95% investment in the underlying
fund(s).

Fund of funds invest in the units of other schemes of the

` same Mutual Fund or other Mutual Funds
`
`` The schemes selected for investment will be based on
`
the investment objective of the FoF

Stay tuned for Part II of Demystifying Mutual Funds to be featured in the October
Edition of The Orange Book!

Get to know more about strategies for choosing the right Mutual Funds.

ICICI Bank Limited is a AMFI Registered Mutual Fund Distributor. Mutual Fund investments are subject to market
risk. Read all scheme related documents carefully. T&C Apply.

The material in this document is derived from sources ICICI Bank believes to be reliable but which have not been
independently verified. In preparing this document, ICICI Bank has relied upon the information available from public
sources and claims no ownership of the same. ICICI Bank makes no guarantee of the accuracy and completeness of
factual or analytical data and is not responsible for errors of transmission or reception and hereby disclaim any liability
with regard to the same.

SEPTEMBER 2022 | VOL.16

Protecting your loved ones financially
after you’re gone
It is difficult enough for families to cope with the loss of a loved one, but the added burden of
dealing with unsettled finances can make an emotional time even more traumatic.

While it seems uncomfortable, planning for the future of your family without you is just as
important as managing your current finances, if not more so.

SEPTEMBER 2022 | VOL.16

Following are some measures that you can take to safeguard your family’s
interest and help in the settlement process when you are not around:

1. Addition of a joint holder

Adding a joint holder ensures that in case of any untimely demise, the
surviving holder can seamlessly access all your financial assets.

 If the mode of operation selected is “Either or Survivor”, then the

surviving holder will be able to continue the account by simply
deleting the name of the deceased account holder
 In case the first account holder wants to provide charge to the second
holder only post an eventuality, then “Former or Survivor” mode can
be opted for

This is a better way to provide control to your family members in case of an

unforeseen event.

2. Registering a Nominee across all banking and financial

products
Nomination facility is available across all banking and financial products.

 Certain products like PPF and Demat can have multiple nominations,
specifying the percentage allocation to each nominee
 The account holder should ensure that the person being nominated is
informed to ensure a rightful claim of the amount, in case of an
unfortunate event
 The account holder should also make sure to change the name of the
nominee in case of the nominee’s demise

Benefits of registering a Nominee:

a) Eliminating or reducing legal litigation where litigants face considerable
costs and delays
b) Financial service providers get a valid discharge of the liability and an
ability to immediately transfer the asset to the nominee

UPDATE NOMINEE

SEPTEMBER 2022 | VOL.16

3. Registering a Will
 A Will is a legally prepared document that specifies how the assets Will
are to be distributed post the death of the asset holder
 To establish the genuineness of the Will, it should ideally be registered
with the help of lawyers

What happens when a person dies without a Will?

 When a person dies without a will i.e. intestate, their assets are passed on to their
legal heirs after the court has verified the legitimacy of ownership
 A Succession Certificate or Letter of Administration (LoA) is obtained from the court to
ensure that the legal heir(s)/rightful claimant is able to settle the claim
 The process of obtaining a Succession Certificate/LoA takes between 6-9 months

4. Consolidation of all your financial information

Over the course of our lifetime, we opt for various financial products
through different institutions and channels. In most families, this
information is often scattered and family members are seldom aware of it.

Hence, it is important that all your personal and financial details are
available in one place and is handy, at all times.

USE ILOCKER

SEPTEMBER 2022 | VOL.16

Hidden insurance covers you didn’t
know about!
Did you know that your Savings and Deposits at the Bank are insured? So is your Credit Card!

There are many such insurance covers that you are entitled to but probably aren’t aware of! Let’s
explore these!

Hidden Insurances

SEPTEMBER 2022 | VOL.16

Deposits & Savings at a bank
 Every deposit holder is eligible to get a maximum sum of `5,00,000 in case
the bank faces cancellation of licence or a merger and cannot pay the
customer their promised sum
 DICGC (Deposit Insurance and Credit Guarantee Corporation) protects the
investment of the customer in Fixed Deposits, Recurring Deposits, Savings
Account and Current Account under this coverage
 The premium for this insurance is paid by the bank and no extra amount is
charged to the customer or deducted from the principal

Credit and Debit Cards

 Ru-pay Credit & Debit Cards offer insurance for accidental death and
permanent total disability
 Card should have been in use within 90 days prior to the accident & claim
should be intimated within 60 days of the event
 Unauthorised transactions on a Debit or Credit Card provided by VISA or
MasterCard are protected by the Zero Liability Cover provided by the
banks

Travel
 In-built insurance is available with some airline tickets
 IRCTC insures goods of all passengers
 Life & Accidental Insurance is available at a nominal cost of 92 paise per
passenger for all passengers availing reserved seats & hospitalisation cover
of `2 lakhs is provided for non-reserved seats

EPF
 EDLI (Employees’ Deposit Linked Insurance Scheme) of `6 lakhs basis
0.5% of employer contribution goes towards insurance premium

SEPTEMBER 2022 | VOL.16

 LPG
 An LPG consumer along with their family is covered against any accident
that could take place due to the LPG cylinder
 Requirements for claim
 Police FIR
 Formal letter to the Gas distributor
 ISI certified accessories used
 Cylinder to be used/ accident to occur at the registered address

Locks and Security Solutions

 Free Home Burglary Insurance

For assistance with your Banking needs:

Call your RM at 022 4440 0000 WhatsApp ‘Start’ to
(Express Relationship Banking Number) 86400 86400
Call us at 1860 120 7777

SEPTEMBER 2022 | VOL.16

Everything you need to know about
the Home Loan floating interest rate
Buying a home is a cherished dream for most people and a Home Loan helps to realise it. However,
availing a Home Loan is also an important financial decision as the impact on our finances lasts until
the home loan tenure ends.

Your home buying journey starts right from selecting a property in a good locality, deciding on the
required loan amount and then arranging a down payment. The most important component of the
home loan is the interest rate which decides the monthly EMI you would be paying towards your
Home Loan.

All banks and financial institutions give borrowers the option to choose between 2 types of
interest rates - the fixed interest rate and the floating interest rate. In this article, we will talk
about the floating interest rate on your home loan and its associated benefits.

What is a floating interest rate on a Home Loan?

As the term states, floating interest rate changes according to the prevalent market conditions.
Let’s understand how the floating interest rate works.

A floating interest rate is defined by the following equation –

FROI* = Benchmark Rate + Spread

*FROI: Floating Rate Of Interest

SEPTEMBER 2022 | VOL.16

Benchmark Rate is a variable component of interest rate, whereas Spread is constant for the
entire term of the loan.

 As per Reserve Bank of India guidelines, all scheduled

commercial banks need to link their interest rate to an external
benchmark like Repo rate, T-Bill, Government Securities, etc.
 Most scheduled commercial banks, including ICICI Bank, have
adopted Repo rate as the external benchmark
 This means that the effective interest rate of a floating
interest rate loan will change with changes in the Repo Rate,
which is decided by RBI

For example, Ravi availed a Home Loan on Oct 01, 2019, when the interest rate was 8%, i.e.:

8% = 5.15% (Repo Rate (Benchmark)) + 2.85% (Spread)

The following revisions happened in the Repo Rate with a tenure of 20 years:

On Mar 27, 2020, the Repo Rate was revised from 5.15% to 4.40%, the Home Loan rate
was revised as below:

Interest Rate
5.15% + 2.85% = 8%
4.40% + 2.85% = 7.25%

The Repo Rate was further reduced on May 22, 2020 from 4.40% to 4%, the Home Loan
rate was revised as below:

Interest Rate
4.40% + 2.85% = 7.25%
4.00% + 2.85% = 6.85%

The Repo Rate was further revised on May 04, 2022 and therefore, further revision in
Home Loan interest rate was as below:

Interest Rate
4.00% + 2.85% = 6.85%
4.40% + 2.85% = 7.25%

SEPTEMBER 2022 | VOL.16

The Repo rate was further revised on Jun 06, 2022 and the Home Loan interest rate was
revised as below:

Interest Rate
4.40% + 2.85% = 7.25%
4.90% + 2.85% = 7.75%

Above, we can see that how interest rate changes with changes in the benchmark rate.

It is worthwhile to note that change in the rate of interest also affects your loan tenure.
Whenever your rate of interest increases, the tenure increases and vice versa.

You can opt for your EMI amount to increase or decrease with the change in the rate of interest
and keep your loan tenure constant.

Difference between fixed and floating interest rates:

Floating interest rate Fixed interest rate

Generally lower than fixed interest rate Fixed rate is approximately 2% higher
than floating

The rate of interest varies throughout The rate of interest is fixed throughout
the loan tenure depending on market the tenure irrespective of the market
conditions conditions

Fluctuations affect the tenure or EMI There are no fluctuations; therefore,

amount the tenure / EMI remains constant

Difficult for budgeting as the EMI Easy for budgeting as the EMI amount
amount is variable. This is ideal for remains the same. It becomes easy for
those who wish to repay their loan those who have a fixed instalment
quickly without pre-payment charges schedule

SEPTEMBER 2022 | VOL.16

What is the interest rate reset process?
Another important information that you should know about is the
interest rate reset process. As per RBI guidelines, loans linked
to external benchmark rate must reset once in three months.

Let us understand with an example - If a Home Loan was

disbursed on Apr 10, 2022, the interest rate reset in this case
will happen on Jul 01, 2022. Therefore, if the benchmark rate on
Apr 01, 2022 was 4% and the repo rate changed from 4% to
4.9% before Jul 01, 2022, the benchmark rate for the loan will
change from 4% to 4.9 %.

What is the interest rate conversion in a floating interest rate Home Loan?
The common understanding about a floating rate Home Loan is that the interest rate will increase
with an increase in the benchmark rate or vice versa.

Let us understand why this happens. As explained earlier, there are two components of Home
Loan interest rate:
1) Benchmark rate 2) Spread
With change in the benchmark rate, the effective interest rate of a loan changes, but there are
scenarios where the spread offered by the bank may change due to various factors like cost of
fund, operational expenses, competition, etc. Most banks offer switch facility to existing
customers to bridge this gap. With this facility, existing customers have the option to move to the
prevailing rate. However, these customers need to contact the bank for revision in spread as the
loan agreement executed between the bank and the borrower requires customer consent.

Therefore, if you are aware about home loan interest rate movement in the market, you can take
advantage of the low floating rate home loan interest.

What is Pre-payment?
Home Loan pre–payment is a facility that lets you pay any portion of your principal outstanding
ahead of schedule without attracting any charges. You can even foreclose your loan without
paying any penalty or charges.

For assistance with your Banking needs:

Call your RM at 022 4440 0000 WhatsApp ‘Start’ to
(Express Relationship Banking Number) 86400 86400
Call us at 1860 120 7777

SEPTEMBER 2022 | VOL.16

 We hope you liked this volume of

We would really appreciate your feedback.

CLICK HERE

to share your feedback and suggestions.

Thank you.

Connect with us for banking solutions:

: Call us on 1860 120 7777

: WhatsApp ‘Start’ to
86400 86400.

Click here to view the disclaimer

SEPTEMBER 2022 | VOL.16