Top mutual funds have launched equity schemes that will look out for investment opportunities in the country’s shift to the new tax regime from July 1 and pick value stocks in a richly-priced market, while buying insurance against downsides. ICICI Prudential Mutual Fund, HDFC Mutual Fund and Birla Sun Life Mutual Fund have launched equity schemes, which will be close-ended funds with tenure of up to three and a half years.
Birla Sun Life Resurgent India Fund — Series 4 will invest in companies that will benefit from the Goods and Services Tax over the next three years. GST is largely expected to shift business from the unorganised to organised sector.
“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,” said A Balasubramanian, CEO, Birla Sun Life Mutual Fund.
ICICI Prudential Value Series 15 will also look to hedge its portfolio as and when valuations rise. “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,” said S Naren. If valuations turn attractive, the fund may gradually and systematically unwind the hedge position, which can help to increase equity participation in order to generate better returns.
HDFC Equity Opportunities Fund is looking to attract investors, who are scared of entering the equity markets as broad indices are at alltime highs and wish to protect their capital. The fund will limit downside by purchasing at the money three-year long dated Nifty put options with a strike around current levels with the balance 92-95 per cent invested in actively managed stocks. So, even if the Nifty were to fall to 7500 at the end of three years, the scheme falls only by the cost of the put, thereby providing downside protection.
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