StructuraWisor by Finwisor · AMFI-Registered Distributor (ARN-166452) · Educational platform, not a solicitation to invest
Your return is measured from a level fixed by the term sheet, not from where the index sits on the day you invest. On most notes it is not even a single day's close.
Every payoff in this site is expressed as a percentage move in the underlying. That move is measured between two numbers defined in the term sheet: the entry level and the exit level. Neither is the level you see on a screen the day you decide to invest.
This is the single most common misunderstanding about these products, and it is why we deliberately do not show a live index level next to a structure. It invites you to anchor on a number that has nothing to do with your outcome.
Your return is measured between two dates the term sheet chooses, not the day you invested.
On the Edelweiss Nifty notes, the entry level is the average of the official closing levels of the Nifty 50 on the primary trade date and on the F&O expiry of each of the next five months. The exit level is the average of the official closing levels on the F&O expiry of the 31st through the 36th month from the primary trade date.
So both ends are six observations spread over six months, not single closes. That has real consequences. Averaging in means a sharp rally right after you invest does not fully count against you, and a sharp fall does not fully benefit you. Averaging out means a crash in the observation window is cushioned, and a spike in it is partly given up.
The practical effect is that an averaged note is less volatile than the headline payoff diagram suggests at both extremes. It trades away some of the best case in exchange for damping the worst case.
On these notes there is a gap worth understanding between the date your return is decided and the date you get your money. The exit level is fixed by the averaging that ends in the 36th month, but redemption is at the end of the 42nd month.
So for the final six months your outcome is already determined and cannot improve, while your capital is still committed. A rally in that window does not benefit you, and neither does a crash harm you, but the money is not available either.
Factor that into the tenure you think you are signing up for. The number that matters for planning is when you are paid, not when the performance stops being measured.
Your return stops moving at month 36. Your money comes back at month 42.
Anand Rathi use a different convention, and it works against you at the start. The entry level is set at a margin ABOVE the closing level on the primary trade date, then rounded up to the next multiple of 100.
On their Nifty notes the margin is 150 points. If the Nifty closes at 24,152, adding 150 gives 24,302, which rounds up to an entry level of 24,400. If it closes at 24,150, adding 150 gives exactly 24,300, already a round hundred, so it is left alone. On the Sensex note the margin is expressed as a percentage instead: the closing Sensex plus 0.6%, again rounded up to the next 100. The two work out to roughly the same handicap in percentage terms.
The consequence is worth being blunt about. Your entry sits above where the index actually was, so the index has to climb that gap before your measured return is even zero. On a note that needs a 36% or 39% rise to pay its full coupon, that handicap is part of the deal you are accepting.
The exit is averaged rather than struck on one day. On both notes it is the average of the closes on seven quarterly observation dates, in the 38th, 41st, 44th, 47th, 50th, 53rd and 56th months.
Your entry is set above where the index actually was, so it starts behind.
Abans notes carry no averaging window and no add-on. Entry and exit are the official closing levels on the dates the term sheet names.
That makes them the most straightforward of the three to reason about, and it means a point-to-point reading of the payoff diagram applies directly. It also means no averaging cushion: a bad day at either end counts in full.
Conventions differ by issuer and by note, and the three above are only the ones currently on this site. Before you invest, find these two definitions in the term sheet and read them literally.
They matter more to your realised return than the participation rate on the front page.
The payoff diagrams and scenario tables here are point to point: they show the investor return for a given percentage move in the underlying, whatever the fixing convention. That is the right way to read the mechanics of a structure.
Where a note averages its entry or exit, the realised move will differ from a simple point-to-point move over the same dates. Treat these diagrams as the shape of the payoff, and the term sheet as the authority on how the move itself is measured.
The term-sheet number your return is measured from, not the index level on the day you invest. On many notes it is an average of several observation dates rather than a single close.
The term-sheet number your return is measured to. On averaged notes it can be fixed months before redemption, so the outcome is locked in before you are paid.
Setting an entry or exit level as the average of several observation closes. It cushions a crash and gives up part of a spike, making an averaged note less volatile than the headline payoff diagram suggests.
The monthly derivatives expiry date used as an observation point for averaging on the Edelweiss and Anand Rathi notes.
This article is educational and does not constitute investment, tax or legal advice, nor a solicitation to invest. Any figures are indicative illustrations of mechanics, not forecasts. Refer to official term sheets and consult a qualified professional before investing.