An open-ended equity oriented fund with an objective to provide investors with opportunities for long-term capital appreciation by investing in midcap companies.

Summary

Type	An Open ended equity Scheme	Benchmark Index	Nifty Free Float Midcap 100
Min. investment:	-Lump sum Rs 5,000 and in multiples of Re 1 thereafter - Additional purchase- Rs 1,000 and multiples of Rs 1 thereafter -Systematic Investment Plan - Rs 500 and in multiples of Re 1 thereafter	Plans: Options:	Regular Direct Growth* Dividend Dividend Reinvestment Dividend Payout Dividend Sweep *default option
Face Value	Rs 10 per unit	Expense Ratio:	Upto 2.50%
Entry Load	NA	Exit Load:	1% if redeemed within 12 months from the date of allotment
Issue Opens	January 05, 2017	Issue Closes:	January 19, 2017

Investment Objective*

The objective of the scheme is to provide investors with the opportunities for long-term capital appreciation by investing predominantly in Equity and Equity related instruments of Midcap Companies.

However, there can be no assurance that the income can be generated, regular or otherwise, or the investment objectives of the scheme will be realised.

*Source: Scheme Information Document

Is this fund for you?

IDBI Midcap Fund (IMF) is an open-ended equity oriented fund with a mandate to invest in midcap companies. Under normal circumstances the fund will invest upto 100% of its net assets in equity & equity related instruments of mid-cap companies.

Midcap companies fall below the large caps, but have a higher growth potential. They are often less researched and hence, more often, available at a discount to the large caps. Investment in midcaps can be rewarding over a long term, as these companies need considerable time to grow in size. But a noteworthy point is, the midcap space is not as stable as compared to largecaps and tend to show fluxes in profitability. They're more vulnerable vis-à-vis largecaps during turbulent times, and for this reason a very high risk-high return investment proposition.

Besides midcaps, IMF may also invest upto 50% of its net assets into equity derivative instruments, but that shall be done only for hedging, portfolio rebalancing and such as other purposes as maybe permitted from time to time. Further, to manage the liquidity needs by endeavouring to construct a well-diversified portfolio that minimizes liquidity risk and credit risk, IMF also holds a mandate to invest upto 35% of its assets in debt and money market securities.

Thus, IMF is suitable for investors only with a very high risk appetite, who have a long-term investment horizon of 5-7 years in their journey of wealth creation.
 

How will the fund allocate its assets?

Under normal circumstances, the asset allocation pattern followed by the fund will be as under:

Instruments	Indicative allocations (% of total assets)		Risk Profile High/Medium/Low
	Minimum	Maximum
A. Equities and equity related instruments of Midcap Companies	65%	100%	High
B. Debt and Money Market instruments	0%	35%	Low to Medium

(*Source: Scheme Information Document)

Further, the offer document states that:

• Debt & Money Market Instruments may include securitized debt upto 10% of its net assets
• The Scheme may invest up to 50% of Net Assets of Scheme into equity derivatives instruments
• The Scheme will not invest in ADRs/GDRs, foreign securities
• The midcap companies may or may not be a constituent of the benchmark index
• The Scheme may also enter into repurchase (repo) agreement and reverse repurchase agreement in Government securities
• The Scheme will not invest in Repo in Corporate Debt Securities
• The Scheme will not write options or purchase instruments with embedded written options. The total exposure related to option premium paid will not exceed 20% of the net assets of the scheme.
• Pending deployment of funds as per the investment objective of the Scheme, the funds may be parked in short term deposits of the Scheduled Commercial Banks, subject to guidelines and limits specified by SEBI from time to time.
• The Scheme may engage in short selling of securities in accordance with the framework relating to Short Selling and securities lending and borrowing specified by SEBI
• The Scheme shall not deploy more than 20% of its net asset in securities lending and not more than 5% in securities lending to any single counterparty.
• The Scheme may also participate in securities lending (in accordance to the guideline framed by SEBI) to augment its income

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What investment strategies will the fund follow?

In the endeavour to achieve the investment objective set out, IMF will follow the below mentioned investment strategy…

For Equity Investments:

The investment strategy would be geared towards constructing a well diversified portfolio of companies from the midcap universe. Mid Cap company in this case is defined as the companies that are either constituent of Nifty Free Float Midcap 100 Index (benchmark) or companies that have a market capitalisation between the highest and the lowest market capitalization of Nifty Free Float Midcap 100 Index (Benchmark). These companies may or may not be a constituent of the benchmark index. Even while investing in Initial Public Offerings (IPOs) of companies, the market capitalisation on listing would be estimated to meet the above mentioned criteria. The market capitalisation range for midcap companies will be determined at the end of every calendar quarter and will be applicable of all investments. The portfolio will be reviewed at the end of every calendar quarter, and in case of the asset allocation falling outside the limits specified in the asset allocation table, the fund manager will rebalance the same within 30 days.

Further, the fund will follow a combination of top-down and bottom-up approach for portfolio construction. It will focus on growth at reasonable prices i.e. the price at which security is being bought as that would be the determining factor for including any particular stock in the portfolio. Any stock which is part of portfolio will be analysed on the merits and fundamentals – competitive position, earnings growth, management quality, promoter track record, future plans, corporate governance and valuations, sustainable cash flows etc. and will be monitored on on-going basis.

For Debt Investments:
The scheme may invest upto 35% of its net assets in debt and money market instruments (including securitized debt upto 10% of the net assets of the scheme). This will help IMF to manage the liquidity needs while it endeavours to construct a well-diversified debt portfolio that minimizes liquidity risk and credit risk.
 

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Fund Manager Profile

Mr V. Balasubramanian: He has over 35 years of experience of which 17 years have been in the mutual fund Industry, and 8 years in Treasury of a nationalised bank. He holds a Master's degree in Commerce (M. Com) and CAIIB degree from the Indian Institute of Banking & Finance. Prior to joining IDBI Mutual Fund, he's worked as a Senior Manager of the Treasury branch of Indian Bank.

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Fund Outlook

On evaluating investment objective and investment strategy, it is evident that the fortune of the fund will be closely linked to the stocks in the midcap domain and how prudently the fund manager goes about constructing the portfolio amid challenging times. Currently the market conditions are highly volatile and uncertainty is at its peak. As the impact of demonetisation will be realised in the next six months, its impact on the GDP is a concern. Valuations dropped significantly – thanks to the fall in prices and marginally improved earnings. But the margin of safety is not very conducive.

Besides there are global headwind in play: ‘Trumponomics’ is coming into effect from January 20, 2017; the Federal Reserve’s endeavour to normalise interest (as market expectations for inflation have advanced); the process for ‘Brexit’ taking pace from end-March 2017; Italy calling a referendum to exit Eurozone in the middle of a struggling banking sector; even in France, the Front National Party President, Ms Marine Le Pen is calling for a ‘Frexit’ (France’s exit from the European Union); there are economic slowdown concerns for China; economic conditions in Japan are morose (although there’s some optimism reported of late).... So, given this backdrop, there would be a a lot of uncertainty looming in 2017 for the market which would make the midcap space more vulnerable.

Hence, IMF will assume very high level of risk while it endeavours long-term capital appreciation for it investors. IMF funds can generate huge returns in bull phase and at the same time can wipe out the earnings in bear phase of market.

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DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) REGULATIONS, 2014

About the Company including business activity

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.

QIS was promoted by Mr. Ajit Dayal with an objective of providing value-based information / views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

‘PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name www.personalfn.com for providing information on mutual funds and personal financial planning, financial markets in general, etc and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.

Quantum Information Services Private Limited (QIS) is registered as Investment Adviser under SEBI (Investment Adviser) Regulations, 2013 and having Registration No.: INA000000680. In terms of second proviso to Regulation 3 (1) of SEBI (Research Analysts) Regulations, 2014 the Company is not required to obtain Certificate of registration from SEBI.

Disciplinary history

There are no outstanding litigations against the Company, it subsidiaries and its Directors.

Terms and condition on which its offer research report
For the terms and condition for research report click here.

Details of associates

1. Money Simplified Services Limited;
2. PersonalFN Insurance Services India Limited ;
3. Equitymaster Agora Research Private Limited;
4. Common Sense Living Private Limited;
5. Quantum Advisors Private Limited;
6. Quantum Asset Management Company Private Limited;
7. HelpYourNGO Private Limited;
8. HelpYourNGO Foundation;
9. QIEF Management LLC, Mauritius
10. Natural Streets for Performing Arts Foundation;
11. Primary Real Estate Advisors Private Limited;
12. Rahul Goel;
13. I V Subramaniam.

Disclosure with regard to ownership and material conflicts of interest
 

1. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company, except QIS receives fees for providing research to Quantum Equity Fund of Fund (QEFoF) which is Fund of Fund scheme managed by QMF and our associates has financial interest in the subject company.
2. Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report.
3. Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront /annualized & trail), if any, for any Schemes by QMF to QIS is also at arm's length and as per prevailing market practices.
    

Disclosure with regard to receipt of Compensation

1. Neither QIS nor it's Associates have any compensation from the subject Company in the past twelve months.
2. Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company in the past twelve months.
3. Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company in the past twelve months.
4. Neither QIS nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
5. Neither QIS nor it's Associates have received any compensation or other benefits from the subject Company or third party in connection with the research report
    

General disclosure

1. The Research Analyst has not served as an officer, director or employee of the subject Company.
2. QIS or the Research Analyst has not been engaged in market making activity for the subject Company.
    

Subject Company means Mutual Fund Schemes

Quantum Information Services Pvt. Ltd. 101, Raheja Chambers, 213, Nariman Point, Mumbai - 400021. Tel: +91 22 6136 1200
Website : www.personalfn.com CIN: U65990MH1989PTC054667

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Quantum Information Services Pvt. Ltd. Regd. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021 Corp. Office: 101 Raheja Chambers, 213, Free Press Journal Marg, Nariman Point, Mumbai 400021. Email: info@personalfn.com CIN: U65990MH1989PTC054667

SEBI-registered Investment Adviser. Registration No. INA000000680, SEBI (Investment Advisers) Regulation, 2013

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