Have you heard about a product which is market linked that not only gives you returns in multiples of what the index earns in case of upside market but can also protect your principal capital in case of downside market?
In this article we aim to analyze and compare the four LEAP products offered by Nuvama Wealth and Investment Limited, thereby facilitating in making an investment decision customized to your unique financial needs and goals.
Nuvama Wealth and Investment Limited (Formerly Edelweiss Broking Limited) is a part of India’s largest wealth management platforms, servicing over 2,400 of India’s wealthiest families as well as ~ 670,000 affluent and high net-worth individuals. This presently includes Investment Management, Mutual Fund Distribution, Research Analysis, Stock Broking, Clearing and Custody business, Portfolio Management business, Depository participant, Debt Syndication; Securities trading and advisory.
Key Financials of Nuvama Wealth and Investment Limited: –
Rationale on Credit Ratings: –
CRISIL Ratings has revised its rating outlook on the existing long term debt instruments and bank facilities of Nuvama Wealth and Investment Ltd [(NWIL; erstwhile Edelweiss Broking Ltd), part of Nuvama Group], to ‘Stable’ from ‘Negative’ and reaffirmed its existing ratings at ‘CRISIL AA-/CRISIL PPMLD AA-r/CRISIL A1+/CRISIL PPMLD A1+r’.
Further, Nuvama Wealth and Investment Limited offers 4 structured products, for each of which, the underlying is LEAP Index. Simply put, your returns are influenced by the movement of LEAP Index.
As per the latest Portfolio holdings, the top LEAP portfolio sector constituent is the Banking sector, and 91% of the index composition is large cap.
The Nuvama Index can be tracked at https://carerisksolutions.com/leap-index/
LEAP Index performance
These products are managed by Mr. Ajay Vora (Executive vice president), has 15 years of experience in Fundamental research and fund management and Mr. Nikhil Ranka (Senior Vice president), has over 15 years of experience in Fund management research and investments.
The four products offered are as follows:
- LEAP AWE 2 year (All Weather Equity 2 years)
- LEAP AWE + PP (All Weather Equity Principal Protected)
- LEAP AWE + NPP (All Weather Equity Non-Principal Protected)
- LEAP Beta
- LEAP AWE 2 year: –
It is the only product of the four that has investment tenor of 2.25 years instead of 3.5 years. This makes it a relatively liquid investment. If the underlying touches 5%, it would provide a return of 29%. The returns stay constant if the underlying moves upwards of 5%.
When the index would be in a range of 0 to 5%, product returns would be 5.8X the underlying. (Example- 5.8% returns if index is at 1%). The principal is protected in case the index goes into the negatives.
This means that as long as the index stays at 5% or above, the investor can expect a return of around 14.5% pa.
How LEAP AWE 2 Year Principal Protected works: –
- LEAP AWE + PP:
This product has an absolute coupon of 51% if the underlying has a return in the range of 10% to 51%, that is to say it offers a flat 51% return in the said range.
There is a 1X uncapped upside, if the index goes beyond 51%. When the index is at sub 10%, the returns would be 5.1X of the underlying.
The tenor is 3.5 years and there is complete principal protection to the extent of face value on the downside.
How Leap AWE+ Principal Protected works: –
- LEAP AWE + NPP:
This product has a similar return model as to the previous product, only having better returns at the risk of the principal not being protected in case of downside.
It has an absolute coupon of 62% if the underlying gives more than 10% returns and 1X uncapped upside if underlying gives more than 62%.
The product has a 1X downside as there is no principal protection, and the tenor is 3.5 years.
- LEAP Beta:
This product has a constant multiple of 1.65X the returns of the underlying on the upside. It offers no principal protection on the downside.
How Leap Beta works: –
Thus, based upon one’s risk profile, investor can opt for any of the above products. Further, as apparent from the above LEAP Index VS Nifty performance, even if LEAP Index is replicating the performance of Nifty, the returns from the products will be in multiples of performance of Index.
To understand in detail about the product as well as to start your investments please feel free to contact us:
The article is authored by Mr. Mayur Solanki from Team RichVik.