Mahindra Rural Bharat Consumption Yojana Fund – Should you invest?
Mahindra Rural Bharat Consumption Yojana Fund Review
There are New Fund Offers coming up now to tap opportunities in Rural and Consumption Theme. Mahindra Rural Bharat Consumption Yojana Fund would open for subscription on 19th October, 2018. This new mutual fund scheme would tap the opportunities from the Rural India theme. We have given our recommendation about such theme earlier this year in 2018 which is yet to see good momentum. What are the risk factors an investor need to consider before investing in this Mahindra Rural Bharat Consumption Yojana Fund New Fund Offer (NFO)? Should you invest in the Mahindra Rural Bharat Consumption Yojana Fund?
Features of Mahindra Rural Bharat Consumption Yojana Fund
This is an open-ended mutual fund equity scheme.
This fund invests in Equity and Equity Related Instruments of entities having exposure towards rural India.
This scheme would open for subscription on 19th October, 2018
This scheme would close for subscription on 2nd November, 2018.
Since this is an open ended scheme, it would again open for subscription after 5 business days from the date of allotment of Mf units after the NFO period.
This scheme is available in both regular and direct plans.
This plan offers both growth option and dividend option.
This scheme is available for lump sum and SIP investment.
Minimum investment is Rs 1,000 and in multiples of Rs 1 there-off for lump sum investments.
Minimum investment is Rs 5000 per month for monthly SIP and for a tenure of 6 months.
The NAV of the NFO is Rs 10 per unit now during initial subscription.
There is no entry load to invest in this mutual fund scheme.
If one wants to exit within 1 year from investment, there is an exit load of 1% of the invested value.
This scheme is classified as high risk scheme.
This scheme benchmark is NIFTY 200 TRI.
Scheme total expense ratio (TER) is estimated up to 2.5% of the total assets on any day.
Who is the Fund Manager of Mahindra Rural Bharat Consumption Yojana Fund NFO?
The Fund Managers are Mr. V.Balasubramaniam.
What is the investment objective and strategy of this Mahindra Rural Bharat Consumption Yojana Fund?
The investment objective of the Scheme is to provide long-term capital appreciation by investing predominantly in equity and equity related instruments of entities engaged in and/ or expected to benefit from the growth in rural India. However, there can be no assurance that the investment objective of the Scheme will be achieved.
What is the allocation pattern in this mutual fund scheme?
This fund investment pattern looks as follows:
1) It invests 80% to 100% in Equity and Equity Related Instruments of entities having exposure towards rural India. This risk profile in this segment is high.
2) It invests 0% to 20% in Equity and Equity Related Instruments of entities other than having exposure to rural India. This risk profile in this segment is high.
3) It invests 0% to 20% in Debt and Money Market Instruments. This risk profile in this segment is low to medium.
4) It invests 0% to 20% in REITS and InvIts. This risk profile in this segment is medium to high.
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Where would the MF scheme invest?
The Scheme aims to generate capital appreciation by investing in entities and businesses that are engaged in and/or expected to benefit from the structural shift and growth in Rural India.
Some of the major sectors are:
a) Farm Sector: all sectors that contribute to farm growth and sectors that may benefit from farm growth due to various policy initiatives.
b) Rural Infrastructure: all sectors that are likely to benefit from the creation of rural infrastructure due to various policy initiatives.
c) Consumption: We expect higher India GDP to be contributed by positive demographic dividend and improvement in consumption pattern from Rural India. All sectors that may directly or indirectly gets benefit out of improvement in consumption/lifestyle of Rural India and benefit from an improvement in the per capita income growth of Rural India.
d) Financial Services: Rural nance, Micro Finance companies, retail nance, housing nance, insurance, tractor & vehicle nance. All the sectors mentioned above are part of this theme and their growth will be propelled by new segment of the population joining in this segment rather than an expansion of the existing segment of the population which is already a part of the mainstream. As the vast majority of the excluded are in the rural, the transformation happening in this space will be driven by Rural India.
List of investible sectors given above are indicative. In addition to the above, the Scheme may also invest in any other sectors that are likely to benefit out of activity in rural India in future due to rural growth oriented policies adopted by the government or the introduction of new reforms.
Can NRI invest in this MF scheme?
Yes, they can invest in this scheme. They can invest on repatriation or non repatriation basis.
What are the risks involved in this fund?
One should consider some of these risk factors before investing.
1) This scheme invests few sectors that are part of consumption and rural theme and hence it is high risk.
2) Since the Scheme will invest in companies that essentially focus on rural India, industries such as agro chemicals /pesticide/ Sugar, coffee, Tea, Jute products, etc. are subject to the vagaries of nature like erratic monsoon, failure of crops, folds, drought etc. hence the performance of the scheme is likely to be affected by it. Industries such as Jute, man made fibre etc., are cyclic in nature.
3) The growth oriented Policy adopted by the Government and its ability to execute projects within a given time frame may also have a bearing on the performance of the Scheme. The growth of Companies that focus on rural India is greatly dependent on the Government’s fiscal policies and legislation.
3) Sector specific funds are always high risk compared to general equity funds.
How is the Performance of the Mutual Funds that are in consumption and Rural theme?
Currently there are existing mutual fund schemes which are investing in Rural and consumption theme. Let us see how they have been performing in the last 1-3 years.
1) Tata India Consumption Fund: This fund gave 11% returns in the last 1 year and 26% absolute returns since the last 2.5 years.
2) UTI India Lifestyles Mutual Fund: This fund gave 8% returns in the last 1 year and 11% annualized returns in the last 3 years.
2) Sundaram Rural India Fund: This fund gave 1% returns in the last 1 year and 17% annualized returns in the last 3 years.
3) Tata Energy and Resources Fund: This fund gave 3% negative returns in the last 1 year and 15% absolute returns since the last 2.5 years.
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Should you invest in the Mahindra Rural Bharat Consumption Yojana Fund?
Consumption had been one of the best performing themes over the last 3 years with the Nifty India Consumption Index giving annualized returns of 15%. Given the uncertainty over trade wars, surging oil prices, rising interest rates in the US and the forthcoming general elections, fund managers believe it would be safe to focus on companies where there is higher earnings visibility. Fund managers expect sectors like auto, health care, consumer durables to benefit from the growth in Indian middle class population, nuclear families and low rural penetration. Hence, Consumption and rural themes are catching attention of many fund managers owing to good opportunities available now.
However, such themes have not yet caught the full opportunities available in the last few months. Owing to huge market fluctuations recently, one may need to wait and watch before investing in to such fresh funds in this theme. Alternatively high risk investors can invest in such rural and consumption based mutual fund scheme for 3-5 years view. This is not for long term investment.
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