HDFC Housing Opportunities Mutual Fund NFO – Should you invest?
To cap the opportunities of Govt of India initiative “housing for all by 2022”, HDFC AMC has come up with a new mutual fund scheme. HDFC Housing Opportunities Mutual Fund (NFO-New Fund Offer) Series 1 would open for subscription on 16th November, 2017. This fund would invest in housing sector and related business in India. What are the features of HDFC Housing Opportunities Fund New Fund Offer (NFO)? What is the investment strategy of HDFC Housing Opportunities Mutual Fund? What are the positives and risk factors in HDFC Housing Opportunities Fund NFO? Should you invest in such new fund Offers?
What is Govt of India initiative “Housing for all by 2022”?
Govt of India has vision of “Housing for All by 2022”. It has targeted to build 5 Crore homes in 5 years through Pradhan Manthri Awaz Yojana Scheme. Govt of India is going to fund the projects under this scheme.
While construction companies would get benefitted, housing related companies would also get benefited with such initiaties. Govt of India is providing interest subsidiary under this scheme for low and middle income groups. It is also providing 100% tax benefits for real estate builders/developers. As per latest EPFO rules, they are providing upto 90% of the EPF amount for buying homes to boost the housing sector.
Features of HDFC Housing Opportunities Fund
To tap the opportunities in Housing sector with Govt of India initiative of “housing for all by 2022”, HDFC AMC is launching HDFC Housing Opportunities Mutual Fund Scheme.
1) HDFC Housing Opportunities Fund NFO Opens on 16th November, 2017.
2) This NFO Closes on 30th November, 2017.
3) This is close ended mutual fund scheme which would get matured at 1140 days. Means one cannot invest once the NFO closes. Investors cannot sell/redeem the fund (except for selling on stock exchanges if buyers are available).
4) There is no entry and exit load in this NFO.
5) This Mutual Fund invests in Housing companies and related business. It would invest in companies engaged in Steel, Cement, Paints and building material etc.,
6) Minimum amount to be invested is Rs 5,000 and in multiples of Rs 10 there-off. Since this is close ended scheme, there is no Systemetic Investment Plan (SIP) feature.
7) Fund manager is Mr.Srinivas Rao Ravuri.
8) Benchmark index is “India Housing and Allied Business India” on which the performance would be compared. This is a custom-made benchmark by IISL (part of NSE) called India Housing and Allied Businesses Index, a minimum 50 stock index that currently includes 14 basic industries.
Where are the objectives of HDFC Housing Opportunities Fund invest?
Here are the investment objectives of this fund.
1) This mutual fund scheme objective is to invest in companies that are engaged in housing in India that would benefit from affordable housing of Govt of India initiative.
2) This MF scheme would invest 80% to 85% in equities of housing and allied business.
3) This fund would invest 15% to 20% in debt and money market instruments.
4) To reduce downside of capital, it would also have invest / put option in derivatives.
Which are the sectors that would benefit from affordability of housing initiative?
Below are the sectors and underlying companies that are part of “India Housing and Allied Housing Business India” Index. This mutual fund scheme may not invest in all companies, however may pick and choose any company that has potential from this index list.
1) Construction sector – DLF, NBCC
2) Engineering – L&T Engineers India, Sadbhav
3) Cement – Ultratech Cement
4) Wooden Panels – Greenply, Century
5) Light Electricals – Havells, Crompton greaves
6) Steel – Tata Steel and SAIL
7) Adhensives and Chemicals – Akzo Nobel
8) Paints – Asian Paints, Nerolac and Berger
9) Sanitaryware – CERA and HSIL
10) Tiles – Kajaria
11) Home Loans – HDFC, HDFC Bank, ICICI Bank and SBI
12) Home Appliances – Voltas, Whirlpool and Symphony
Reasons to invest HDFC Housing Opportunities Mutual Fund
1) This fund would invest in opportunities arising through Govt of India initiative “housing for all by 2022”.
2) This fund aim is for capital appreciation by investing in housing opportunities in India.
3) Rising disposable income and lower interest rates to improve housing affordability and such MF schemes can benefit.
Reasons NOT to invest HDFC Housing Opportunities Fund
1) This is thematic / sector fund which invests in single sector which is high risk.
2) This scheme invests in equities of housing which are high risk. These are like high risk high return mutual fund schemes.
3) This is a close ended scheme with tenure of 1140 days i.e. 3 years and 45 days. One may or may not get good returns in 3 years equity fund scheme.
4) This fund tenure is 3 years and 45 days. You cannot sell your mutual fund unit. However these are listed on stock exchange and you can sell if buyers are available.
HDFC Housing Opportunities Mutual Fund – Should you invest?
HDFC Housing Opps Fund would invest in housing opportunities that would benefit from Govt of India “housing for all by 2022” initiative. There is no doubt that such initiatives would create enormous opportunities for investment. However, HDFC Opps Fund is close ended mutual fund which is just for 3 years. Mutual Fund schemes may or may not give good returns in 3 years. What happens if the equities in which such fund invests does not return good return in 3 years ? There is no way you can hold it for couple of more years. In such case you need to compromise with low returns. I would have been excited to invest in such funds if they are “open ended” or have atleast 4-5 years tenure. Investors should go through such negative points before investing in such thematic /sector mutual fund schemes.
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HDFC Housing Opportunities Mutual Fund NFO