IDBI India Top 100 Equity Fund

An Open–ended Growth Scheme

Summary

Type	Open-ended diversified equity scheme	Additional purchase:	Rs 1,000 and in multiples of Re 1 thereafter
Min. Investment	For lump sum:Rs 5,000 and in multiples of Re 1 thereafter For Systematic Investment Plan (SIP) Monthly option: For a SIP period of min.12 months -> Rs 500 and in multiples of Re 1 thereafter, per month For a SIP period of min.6 months -> Rs 1,000 and in multiples of Re 1 thereafter, per month Quarterly option: For a SIP period of min.4 quarters -> Rs 1,500 and in multiples of Re 1thereafter, per quarter
Face value:	Rs 10 per unit	Benchmark Index:	CNX 100 Index
Issue Opens	April 25, 2012	Issue Closes	May 09, 2012
Entry load:	Nil	Exit load:	1%*

* An exit load of 1.0% will be charged if redeemed or switched out on or before completion of 1 year from the date of allotment of units.

Investment Objective*

The investment objective of the scheme is "to provide investors with opportunities for long-term growth in capital through active management of a diversified basket of equity stocks, debt and money market instruments. The investment universe of the scheme will be restricted to equity stocks and equity related instruments of companies that are constituents of the S&P CNX Nifty Index (Nifty 50) and the CNX Nifty Junior Indices comprising a total of 100 stocks. These two indices are collectively referred to as the CNX 100 Index. The equity portfolio will be well-diversified and actively managed to realize the Scheme objective."

 

*Source: Scheme Information Document

Is this fund for you?

IDBI India Top 100 Equity Fund (IIT100) is the first actively managed diversified equity fund, from the stable of IDBI Mutual Fund, being linked to CNX 100 index as its benchmark. Being a diversified equity fund, IIT100 has the freedom of investing across stocks and sectors within the universe of the CNX 100 index, thereby attempting to generate opportunities for long-term wealth creation. The fund will attempt to identify companies which are fundamentally sound and have long-term growth potential. But having said that, IIT100 will not refrain from taking short-term opportunities which may arise from time to time. Thus, this may lead to some trading in the portfolio as well, where the fund manager would take a call depending upon the opportunities prevailing in the market during valuation mis-match and other events in the equity markets.

However for the risk control and monitoring of the fund, the Asset Management Company (AMC) - i.e. IBDI Asset Management Limited, will monitor the following aspects:
 

• Overall economic environment
• Company specific news
• Financial performance
• Liquidity



 

As far as the fund house is concerned, IDBI Bank Ltd. stands as the sponsor to the AMC (IDBI Asset Management Ltd.) Incorporated in January 2010, the AMC has been in existence for only little over a couple of years. The fund house initially launched debt mutual fund schemes and then later in the equity mutual fund category launched indexed based products (which are passively managed).

 

Portfolio & Investment Strategy

IIT100 will follow a growth style of investing, and while discovering stocks for its portfolio will adopt a top-down as well as bottom-up approach to investing. To identify fundamentally strong companies (which have a potential for long-term growth) at reasonable prices within the universe of CNX 100, the fund will focus on the following factors amongst others:
 

• Competitive position
• Earnings growth
• Management quality
• Liquidity



 

But IIT100 will not rule out short-term opportunities that may arise from time to time. Thus, this may lead to some churning in the portfolio, where the fund manager would take a call depending upon the opportunities prevailing in the market during valuation mis-match and other events in the equity markets.

Moreover for hedging and portfolio balancing purpose, IIT100 may also invest in derivative instruments (in accordance to the guidelines stipulated by RBI) upto 50% of its net assets, where it could take both long and short positions, depending upon what is deemed fit. However, the fund will not write options or purchase instruments with embedded written options.

The asset allocation which will be followed by the fund will be as under:
 

Instruments	Indicative Allocation Range (% to Total Assets)		Risk Profile High/Medium/Low
	Minimum	Maximum
Equity and equity related instruments of constituents of CNX 100 Index	70	100	High
Debt and money market securities	0	30	Low to Medium

(Source: Scheme Information Document)

 

Fund Manager Profile

IIT100 will be managed by Mr. V. Balasubramanian (53 years of age), who holds over 30 years of experience and has to his credit a Masters’ degree in Commerce (M.Com) along with being a Certified Associate of the Indian Institute of Banking (CAIIB).

Prior to being appointed as the fund manager in IDBI Asset Management Ltd (in November 2011), he worked as a dealer with the same AMC. Moreover, he’s also been an ex-banker during his stint with Indian Bank.

 

Fund Outlook

The launch of the fund has come at when the Indian equity markets are undergoing a corrective phase and where the BSE Sensex is still down by good -22.6% from their last peak of 21,004.96 points (made on November 5, 2010). Thus this gives the fund manager the opportunity to undertake value buying, at these reasonable valuations of the equity markets. But, given the fact that global markets are feeling the shivers of sovereign rating downgrades and economic forecast being tapered, the downside risk to IIT100 cannot be ruled out in the immediate ensuing months post its inception. While at present the RBI has reduced the policy rates by 50 basis points (bps), it may fail to provide impetus to economic environment, unless we see policy rates pulled down further. Thus while the opportunities for the fund manager may be galore, the economic and political risk looming make it risky.

 

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michelle.long@ngaitahu.iwi.nz Jun 17, 2012 get paid ahead of equity. A creimocmal paper or bond gets a fixed interest income as compared to a stockholder which earns a dividend or stock price appreciation.If the company is profitable and will grow in the future buy the stock (equity). If it is stable with solid earnings, buy the paper, bond or lend it money (). If the company gets liquidated, debt holders get paid ahead of stockholders.

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