The Baroda Asset Management India Limited is a fully-owned subsidiary of the state-run Bank of Baroda with Baroda Trustee Private Limited as its trustee. It offers a broad range of money market, debt, and equity instruments. The current mutual fund offerings of this AMC feature more than 15 schemes, spread across equity, hybrid, and debt categories, which includes the best Baroda equity mutual funds.

Equity mutual funds are a category of mutual funds that invest a minimum of 65% of their corpus in stocks. The remaining asset portion of 35% might be invested in money-market or debt instruments. Apart from being primarily divided as active or passive, equity mutual funds can be segregated based on various categories. For instance, they can be divided according to market capitalisation, or they can also be classified as sectoral or diversified.

In an active equity fund, a fund manager conducts a market scan, researches companies, assesses performance, and searches for the best stocks for investing. A fund manager constructs a portfolio that reflects a well-known market index like Nifty Fifty or Sensex in a passive equity fund.

Premised on market capitalisation, equity mutual funds are of four types – small-cap, mid-cap, large-cap, and multi-cap. Small-cap funds invest primarily in small-cap companies, mid-cap funds in mid-cap organisations, and so on.

Based on sectoral diversification, there are two types, namely, diversified and thematic funds. The latter involves investments in a particular theme or sector, like infrastructure, pharma, infotech, etc. The former type of equity mutual fund invests across different sectors.

Another type of equity MF is ELSS, which facilitates tax-saving under Section 80C. It is one of the only mutual funds with a lock-in period of 3 years. That means investors cannot redeem their investments prior to this period.

Since a high amount of risk accompanies these mutual funds, they are capable of offering high returns compared to hybrid and debt funds. Primarily, the benefit of investing in the best Baroda equity mutual funds 2023 is that an investor need not be concerned about selecting shares or stocks to invest in as the fund manager takes care of that.

There are over 8 top Baroda equity mutual funds featured in AMC's current offerings, comprising mid-cap, ELSS, multi-cap, and thematic schemes.

Taxability

In addition to being familiar with the best Baroda equity mutual funds, it is highly necessary to understand the taxability involved in these funds.

Long-term Capital Gains Tax: The investor earns long-term capital gains when selling their equity fund units after a holding period of 12 months or more. Tax exemption is allowed on these capital gains up to a limit of Rs.1 lakh in a year. If the long-term capital gains exceed this limit, an LTCG tax is levied at 10% on the excess sum.

Short-term Capital Gains Tax: When redeeming equity fund units within a period of 12 months, investors earn short-term gains. Irrespective of the amount, these gains attract taxes at a 15% rate.

TDS: As per section 194K, TDS at a rate of 10% won’t be deducted if the investor’s dividend income is within Rs.5000 for a given financial year.

Factors to Consider Before Investing

Other than the taxation on the best Baroda equity mutual funds, there are some other factors that investors must consider.

Investment objective: Every scheme has a unique objective, which can be aggressive wealth appreciation, steady capital growth, etc. Investors may want to check an equity MF’s objective when shortlisting potential schemes. It’d help them select a plan that accords with their investment outlook and horizon.

Risk appetite: An equity mutual fund comes with a substantial amount of risk. Investors must be aware of their risk appetite to select the best Baroda equity mutual fund. Risk tolerance is a highly subjective issue, and the financial situation of an individual is a key consideration in this regard.

Experience of the fund manager: The performance of an investor’s fund depends a lot on the competence of its manager. That is why most experienced investors put significant emphasis on a fund manager and their team. Fund managers are differentiated based on several factors—ability to identify scripts, experience level, qualifications, etc.

Past performance of the fund: Though the past performance of a particular fund does not indicate probable returns, it can help depict its robustness under varying market conditions. The past returns of a specific scheme can be used for judging its quality and ability to stick to the pre-set objective.

Expense ratio: The expense ratio defines the fee an AMC charges for managing a scheme. It includes the fees for recording keeping and the salary of a fund manager. In the long run, a scheme having a low expense ratio has the potential of translating to greater returns.

Among the best Baroda equity mutual funds, choosing one can prove to be a daunting task for first-time investors. However, this article, along with a basic understanding of mutual funds, can prove to be highly helpful.