Saturday, 12 May 2012

IDBI India Top 100 Equity Fund-Did You Invest?

Danilo Rizzuti

Do Not Compare Apple with Potato. This was my comment for one my friends Naveen. Now you might be thinking that wealth U Create (wUc) is being harsh. I will let you all decide if i was being mean by saying this. Here is little brief about Naveen.
Naveen has the real art of making money in Real Estate. All that he does is, invest in flats that are almost ready for possession. The trick here is, he would invest only in those flats that are built by builders who are trying to create an image or band name. In other words Good Builders who are yet to establish themselves in this competitive R.E world. Hold the flats for few years and sell it out for profits. This is something similar to investing in small caps that have the potential be ”Leaders Of Tomorrow”. So far Naveen has had a great success with this strategy.
Recently he decided to venture his luck or strategy in stock world. Naveen started off his journey by investing lump sum in recently launched NFO "IDBI India Top 100 Equity Fund".   I asked him, why did he choose to invest in this particular fund? This is what Naveen Explained:
"IDBI India Top 100 Equity Fund" is IDBI's is the first actively managed fund from IDBI. IDBI is trusted name and have proven track record, hence there is no way they would let this fund to underperform. If they have to prove themselves, they need to ensure that this Fund Outperforms. More over by investing in this fund, he would be exposed to Large Cap stocks that have the potential to give good returns in long term.He also added the Good Old Myth of NAV available at 10 Rs. Click Here to read Mutual Fund Myths
Take Away : In short Naveen applied his real estate strategy. Let us explore this fund a bit more.
  • The Man Behind the Fund - V. Balasubramaniam- For IDBI he is been handling MIP Fund and Three Index Funds. In case of index Funds I don think he would have major role to play.
  • Minimum Investment: Rs 5,000 for Lump sum and Rs 500 for SIP (Period of SIP 12 Months).  Rs 1000 would SIP amount if you want SIP tenure for 6 months.
  • Asset Allocation: Exposure to Equity -(Minimum 70% to Maximum 100% )  :  Exposure to Debt-(Minimum 0% to Maximum 30%).
Pros of the Fund:
  • CNX 100 - In all CNX 100 will provide fund manager 100 stocks to build his portfolio. Fund manager would have enough options to choose his best picks.
  • Timing- Sensex is hovering at around 16K. Fundamentally Good stocks are trading at cheap price. The fund manager can make investments in blue chip that are trading at fair value.
  • Fund Focus- The Fund is focused to invest in large caps or big companies. This means that fund would be relatively less volatile.
Cons of the Fund:
  • This Fund is NFO- Financial Guru's recommend to stay away from NFO's.
  • New Fund House- The Fund is from a New Fund House. There is no past experience or track record of handling equity funds.
  • Nothing New To Offer- The Fund has nothing new to offer (In terms of investing style, Theme), There are quite a few good funds with good track record.
  • Fund Expense- For first 100 crore, the expense ratio is 2.5%. This is on higher side.
Conclusion:  Naveen always had his share for luck. Even this time he may end up with smile. Current Market Conditions will give the fund manager enough opportunity for value buying. The valuations are attractive. A pull back or recovery from here, will give attractive returns for investors.
Click Here for additional reading on Mutual Funds.
My Take Away: Weather NFO or existing fund, current valuations are attractive, investing now will and holding it for long term might be rewarding. I would bet my money on existing funds. What about you?


kings said...

Does a SIP in debt/liquid funds make sense, or RD is better? i already have sip in equity. but just want to save some money regularly in safe products also.

WealthUCreate said...

RD is better if you are in lower tax bracket. If you are in higher tax bracket, Post tax returns will be low. RD give your assured returns where as Liquid and Debt dont. Well if you dont need money for 15 years... Best to invest in PPF. I have written an artilce on liquid funds, MIP... those articles will give you more info....

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