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Should you still invest in MNC Mutual Funds?

MNC Mutual fundsShould you still invest in MNC Mutual Funds?


MNC Mutual funds have been giving superior returns for the past few years. Some of the mutual funds like Birla SL MNC Fund or UTI MNC Fund gave 70% returns in last 1 year and 25% annualized returns in last 5 years. Recently SEBI has given certain guidelines in Nov-2014 which would affect MNC companies. Should you still continue to invest in MNC Mutual Funds? How SEBI guidelines affect MNC mutual fund returns in future? This post is based on request from Ms. Pavani on “Suggest a topic” to write about MNC mutual funds.

What are MNC Mutual Funds?





Companies which are registered outside India, but having subsidiaries and operations in India are termed as MNC companies. MNC companies are preferred as long term wealth creators by investors. Funds that bet and invest in MNC companies are MNC Mutual Funds. MNC’s are believed to be good companies as they are well managed by professionals, good corporate governance and well established and have quality products. MNC companies have been doing well and outperformed the Indian companies in terms of performance. These have given high returns compared to some of the best performing mutual funds in 2015. Some of the companies have been de-listed from the Indian markets and share prices are shooted significantly. De-listing offers went to 46 in 2013-14.

What are new SEBI guidelines issued in Nov-2014?





All well. Wait. Recently, SEBI has revised the norms in Nov-2014 which has changed the view on MNC companies.  These guidelines would discourage MNC companies. SEBI amended SEBI (Delisting of Equity Shares) Regulations in Nov-2014. De-listing is now tough as per recent amendments.

What are new norms for MNC companies issued by SEBI?





  • Buy back at least 90% of total capital
  • Acquire 25% of the share capital out of total public shareholder capital as on the date of which delisting has been approved.
  • Companies should be delisted within 76 days (earlier 117 days)
  • Delisting at a price at which 90% of the shareholders, including promoters tender those shares under the price of the reverse book building.
  • These norms are favoring minotory shareholders and not a majority of shareholders.
  • Practical problems make them not to delist. Open offer would would reduce drastically / significantly in future.

How do they affect MNC Mutual Funds?





MNC mutual funds have been enjoying superior returns all along mainly by increase in share prices due to delisting apart from good performance from  them. Now with delisting norms becoming harder, may MNC companies would not think of delisting. Hence share prices may not shoot up and you may not see superior returns in such stocks going forward like what you have seen earlier. Hence, you cannot assume that investing in MNC funds would give good returns in future.

Conclusion: MNC mutual funds have been good returns. However, due to new norms from SEBI, MNC mutual funds are unattractive now. Alternatively, you should consider investing in multi-cap mutual funds like Reliance Equity Opps Fund / Franklin High Growth Funds or Opportunities Mutual funds like UTI Opportunities fund / L&T Special Situations fund, etc.

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Suresh
Should you still invest in MNC Mutual Funds



The Author

Suresh KP

Suresh KP i.e. me have written 1,500+ articles on this blog. I love doing analysis on various Best Investment Plans like mutual funds, Stocks, IPO's, NCD Bonds, Insurance products. If you like our blog, you can share some of the good articles on your Facebook or Twitter. This would be the BIGGEST gift which you would be giving to us.

17 Comments

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  1. Hi Suresh

    Presently I am investing

    1.sbi blue chip fund  1000

    2.icici focus blue chip  2000

    3 uti  mnc fund…1000

    4.HDFC balance fund  2000

    5 hdfc midcap opportunity  2000

    6.DSp blackrock small cap 2000

    Please suggest me should I continue sip with above fund or make some change.

    I want to increase sip amount 2000. Which fund you suggest for that.

    1. Hello Mitra, You are investing in good funds. Stay invested. You can increase your SIP values from existing funds, else you can add some largecap funds in your portfolio like Birla SL Frontline equity etc.,

      1. Thanks, Suresh for your valuable suggestion.

  2. Can I freshly enter into MNC funds likeBirla Sun life MNC funds can you suggest me the top performing funds in Large cap,Midcap ,or Multicap funds.

  3. I dont agree with ur view, both mnc funds will genrate strong return in long term.Most mnc companies are household names. There future growth is very strong.

    1. Nandish, Thanks for your comments. I have given overall view that we cannot expect past returns (higher returns that received in last few years) in future for these MNC funds. 

  4. Respected Suresh,
    Inspite of new Norms issued by SEBI in Nov-2014, Birla MNC Fund SIP Return ( monthly) from 1-Jan-2015 till 1-Aug-2015 is 33.53%.
    Do you still advise reduction in fresh investments?

    1. In short term ok, but in long term, we may not see good returns, hence try to avoid

  5. Sir, I was invested in Birla SL MNC fund from 13 months through SIP. now its value is 19655/-. after reading above article, shall i need to withdraw this amount or not, plz suggest me..

    1. Hold for some more time Chandra. However you can reduce fresh investments into this.

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