NFO review: Mahindra Top 250 Nivesh Yojana launches large and midcap fund aiming to beat market cycles

The fund seeks to generate long term capital appreciation and income through investments in equity and equity related securities of large and mid-cap companies

Kumar Shankar Roy Dec 9, 2019

Large cap mutual fundMahindra Mutual Fund, a wholly owned subsidiary of Mahindra and Mahindra Financial Services Limited (MMFSL), has launched a new open ended equity scheme ‘Mahindra Top 250 Nivesh Yojana’. The fund is for investors who are seeking to generate long term capital appreciation and income through investments in equity and equity related securities of large and mid-cap companies. The ‘Large & Midcap’ fund category has around 27 schemes, with schemes from Mirae Asset, DSP MF and Canara Robeco MF holding the pole positions in terms of fund size. Given that Mahindra MF is a relatively new fund-house, let us see how Mahindra Top 250 Nivesh Yojana aspires to be different. RupeeIQ decodes the offering for you.

Large & Mid Cap fund basics

The definition of large cap companies is 1st – 100th company in terms of full market capitalization. Mid Cap companies are those from 101st – 250th company in terms of full market capitalisation.

The Large & Midcap fund category allows the fund manager to have minimum 35% investment each in large cap and mid cap stocks. This takes care of 70% of equity allocation at all times. The rest 30% is a tactical call that is taken by the fund manager. Compare this to the large cap funds, the minimum investment is 80% in large cap stocks at all times, which leaves only 20% for tactical call. The mid cap fund structure allocates minimum 65% in mid cap stocks at all times.

Why Large & Mid Caps now

Ashutosh Bishnoi, MD & CEO, Mahindra Mutual Fund, says that the Indian economy is expected to bounce back sooner than later on account of various fiscal and monetary stimulus announced by the Government of India and the Reserve Bank of India. The future direction of the markets looks promising on potential corporate earnings recovery and gradually steadying macroeconomic environment.

Mahindra MF believes the scheme will offer growth with stability approach to the equity portfolio, and is suitable for investors who are seeking long term wealth creation and income.

Fund details

The New Fund Offer period has opened on December 6, 2019 and is slated for closure on December 20, 2019. The scheme will reopen for continuous sale and repurchase within five business days from the date of allotment.

Venkataraman Balasubramanian, Chief Equity Strategist, Mahindra Mutual Fund says Mahindra Top 250 Nivesh Yojana aims to build a portfolio with nearly equal exposure in large and mid-cap, and take tactical calls based on market cycles. The stock selection process will be done through Quality, Outlook, and Valuation (QOV) process for superior return potential. The scheme plans to allocate funds across market caps with a mix of top down and bottom up strategies, based on research and outlook.

The scheme would invest minimum 80% in equity and equity related securities, and upto 65% in large cap and mid cap companies. The scheme also has made provision to invest upto 20% in debt and money market securities (including CBLO, Reverse Repo) and upto 10% in units issued by REITs & InvITs, explained Krishna Sanghavi, Chief Investment Officer – Equity, Mahindra MF in an interaction.

Giving details about the QOV process, Sanghavi said that the fund-house looks at Quality (Q) by monitoring corporate governance red flags. It has an Internal threshold level of ROE (Return on Equity). Promoter and Management, Quality of Business and Track Record are also considered. Mahindra Top 250 Nivesh Yojana will follow rule based diversification for optimum performance in changing market cycles, says Sanghavi. The scheme will not take any cash calls. Investors can expect the portfolio to be ready within two months of the NFO.

Talking about the valuations, Sanghavi pointed out that mid caps are trading at 20% discount to the Nifty 50 and this gap is the highest in the last decade or so. The underlying focus of the fund will be in identifying mid cap companies where growth is there.

Snapshot

Scheme Type – Open Ended
Scheme Category – Equity Scheme – Large & Mid Cap Fund
Exit Load – An Exit Load of 1% is payable if Units are redeemed / switched-out upto 1 year from the date of allotment; Nil if Units are redeemed / switched-out after 1 year from the date of allotment.
Minimum Subscription Amount – Rs 1,000
Minimum Redemption/Switch-Out Amount – Rs 1,000/- or 100 units or account balance, whichever is lower
Minimum Switch-in Amount – Rs 1,000

RupeeIQ take

Combining large cap and mid cap stocks in the same portfolio gives a few distinct advantages. One, a large & mid cap portfolio will typically be less risky than a pure-play mid cap portfolio. Two, a combination of large cap and mid caps stocks in the same portfolio will mean that the stability of large caps and growth potential of mid caps. Three, many investors are wary of investing a lot of money in mid caps right away. For them, the large & mid cap fund category is the stepping stone for gaining confidence.
At the end of the day, investing is all about having adequate weight in the right stocks at the right time. If you believe that Mahindra Top 250 Nivesh Yojana can do it, you should consider investing in this new scheme.

Disclaimer: Views expressed here in this article are for general information and reading purposes only. They do not constitute any guidelines or recommendations on any course of action to be followed by the reader. The views are not meant to serve as a professional guide/investment advice / intended to be an offer or solicitation for the purchase or sale of any financial instrument including Mahindra Top 250 Nivesh Yojana.


Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. Kumar is a financial journalist, with a functional experience of 15 years. He tracks mutual funds, insurance, pension, PMS, fixed income/debt and alternative investments markets closely. He has worked for The Times of India, The Hindu Business Line, Deccan Chronicle Group, DNA, and Value Research, among others, across different cities in India. He is deeply interested in marrying data insights with actionable opinion. He can be contacted at kumarsroy@rupeeiq.com.

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