Goods and Services Tax (GST) has finally become a reality as of July 01, 2017. The Mutual Fund industry which usually sees any macro-level change as an opportunity to grow its Assets Under Management (AUM), couldn’t hold itself back this time either. Habitually, mutual fund houses strike when the iron is hot, aiming to build up their future.

Storytelling is an art, and without a shadow of doubt, mutual funds certainly seem to know how to spin tales.

So what’s the story this time?

A few companies in India are going to benefit under GST regime disproportionately. Besides, positive effects of demonetisation and recovery in public sector banks offer investors exciting investment opportunities at present.

Birla Sun Life Mutual Fund, ICICI Prudential Mutual Fund, and why investors shouldn’t invest in NFOs. Those who want to benefit from macroeconomic opportunities, may subscribe to PersonalFN’s latest unbiased research report—Strategic Portfolio For 2025, based on a rare investment strategy used by successful investors. HDFC Mutual Fund have lined up New Fund Offers (NFOs) to capitalise on this opportunity and have launched close-ended schemes.

You would be amazed to see how the top-guns of these fund houses are batting for the success of their  new products, at a time when the Indian markets are at an all-time high. Valuations are expensive as well, but that doesn’t appear to be much of a concern to these fund houses.

CEO of Birla Sun Life Mutual Fund, Mr A Balasubramanian, said, “GST implementation, coupled with demonetisation will contribute to India’s economic growth momentum and corporate profitability. This will result in re-rating for many companies, and will prove to be a great investment opportunity for investors in certain sectors that will be major beneficiaries of this transition.” 

To address the concerns about market valuations, Mr S Naren, Executive Director of ICICI Prudential Mutual Fund clarified that, “As global uncertainties cannot be ruled out, near-term volatility can be expected. Hence, investors could consider investing in funds which can limit the downside due to volatility.” 

“As the market valuations rise, the fund aims to gradually hedge a part of its portfolio by buying put options. Exposure to put options may be increased with an aim to limit downside risk,” he added further.

For investors to have clearer understanding, mutual funds should answer these questions as well:
 

• Why do they need to launch NFOs, when they can take advantage of new opportunities through their existing offerings. Every mutual fund house launching an NFO has opportunities fund in its product bouquet. Won’t it be an injustice to investors of the existing scheme if fund the manager sees new opportunities, yet doesn’t invest in them, just because there’s a new launch? 
   
• Since fund houses with NFOs are taking refuge under the “close-ended” structure and talking about buying insurance, why launch NFOs in the first place? The same offerings can come at a time when markets are in a downtrend. If mutual funds aren’t even reasonably sure about whether market correction will take place or not, why do they want to buy insurance? This gives a feeling that mutual funds themselves are confused about the direction of markets—and it’s perfectly right if they are—this is how markets behave. But then why put investors’ at risk of the unknown?

Surprisingly, the Securities and Exchange Board of India (SEBI) which recently took several investors’ friendly initiatives is closing its eyes to such unhealthy practices.

PersonalFN has elucidated time and again why investors shouldn’t invest in NFOs. Those who want to benefit from macroeconomic opportunities, may subscribe to PersonalFN’s latest unbiased research report—Strategic Portfolio For 2025, based on a rare investment strategy used by successful investors. We highly recommend that you opt in for this service if you’re willing to take high risk and have a investment time horizon of 7-8 years.

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