In the Index Long-Term Strategy, various financial instruments are strategically employed to optimize exposure, manage risk, and enhance returns. Here’s a detailed breakdown of the roles of each instrument within this strategy:

• NiftyBees:
  • Purpose: NiftyBees serves as the foundational investment vehicle, providing exposure to the Nifty 50 index, which represents 50 prominent stocks on the National Stock Exchange of India (NSE).
  • Allocation: We allocate 30% of the total exposure value to NiftyBees, reflecting a commitment to passive investing and capturing the performance of the broader market.
• Nifty Futures:
  • Pledging NiftyBees: To maximize exposure and facilitate additional investment, NiftyBees is pledged as collateral.
  • Futures Purchase: Utilizing the margin obtained from the pledged NiftyBees, we invest in Nifty Futures, with the value of the futures position equivalent to 70% of the total exposure value.
  • Synthetic Futures: Synthetic futures are strategically chosen to eliminate daily Mark-to-Market (MTM) payments, streamlining the management of the position and reducing short-term volatility impacts.
• Put Options:
  • Hedging Strategy: To mitigate potential downside risk associated with the NiftyBees and Nifty Futures positions, put options are purchased.
  • Comprehensive Risk Management: By incorporating put options, the strategy aims to protect the overall portfolio from adverse market movements, providing a level of insurance against potential losses.
• Debt Funds:
  • Objective: To leverage interest rate differentials and benefit from interest rate arbitrage.
  • Investment Allocation: An amount equivalent to the exposure of Nifty Futures is invested in debt funds. This allocation allows for capitalizing on the potential returns generated by the debt market while maintaining a balanced and diversified portfolio.
  • Risk Diversification: Debt funds add an element of risk diversification to the overall strategy, as they are less influenced by equity market fluctuations and can provide stability to the portfolio.

Key Considerations:

• The strategy combines the growth potential of equity investments with risk mitigation strategies through options and debt funds.
• The use of synthetic futures and options helps manage market volatility and enhances the efficiency of the overall portfolio.
• Allocation percentages to each instrument are carefully chosen to align with the long-term goals of the investor, considering risk tolerance and market conditions.

It’s essential for investors to regularly review and adjust the strategy based on market dynamics, ensuring it remains in line with their financial objectives and risk preferences.