Investment Valuation in India

An Equity-Linked Note (ELN) is an instrument that provides investors fixed income like principal protection together with equity market upside exposure. An ELN is structured by combining the economics of a long call option on equity with a long discount bond position. The investment structure generally provides 100% principal protection. The coupon or final payment at maturity is determined by the appreciation of the underlying equity. The instrument is appropriate for conservative equity investors or fixed income investors who desire equity exposure with controlled risk. An Equity-Linked Note (ELN) is a debt instrument that differs from a standard fixed-income security in that the coupon is based on the return of a single stock, basket of stocks or equity index (the “underlying equity”). An ELN is a principal-protected instrument generally designed to return 100% of the original investment at maturity, but diverges from a standard fixed-coupon bond in that its coupon is determined by ...

Gone are the days when the investors had the option of investing only in Equity markets, and if there was any diversification needed, they had the option of Debt, Bullion, Commodities and at the very best, Real Estate. But we all have known the constraints of investing in them. High investment, low liquidity in the markets and long term lock in periods. Then came Mutual Funds which are still considered amongst the best options for investors. Let me talk about "Structured Products", the secret of how the investment managers (Yes, of Mutual Funds also) manage to generate high returns or at least, maintain the returns. Investment managers across the globe continuously strive towards designing products that suit various investor requirements. Asset managers in the developed markets (now penetrating in emerging markets like India and China) have been offering structured products across asset classes like equities, debt, forex and commodities for a long time now. However, in In...