ICICI Prudential open subscriptions for the NFO ICICI Prudential Bharat Consumption Fund- Series 2 on 12th April. The Series 1 of this NFO recently launched on April 5, 2018.

Is this NFO worth investing in as an investor or should you simply stick to investing in existing mutual funds with a track record? Read on to know.

Investment Objective of ICICI Prudential Bharat Consumption Fund

The investment objective of the Scheme is to provide capital appreciation by investing mainly in equity and equity related instruments of sectors that could benefit from growth in consumption and related activities. However, there can be no assurance or guarantee that the investment objective of the Scheme would be achieved.

Key Details of ICICI Prudential Bharat Consumption Fund

NFO Period: 12th April to 26th April
Fund Manager: Mrinal Singh and Priyanka Khandelwal
Benchmark: Nifty India Consumption Index
Minimum Investment: Rs 500
Tenure: 1,300 days (A little more than 3.5 years)

Options: Growth (called Cumulative), Dividend Payout and Dividend Transfer (which will invest dividends in other open-ended ICICI Prudential Schemes).

ICICI Prudential Bharat Consumption Fund Series 2 is opening for subscription from April 12. It will focus on domestic consumption in India, much like its predecessor Series 1.

Invest in ICICI Prudential Bharat Consumption Fund- Series 2

If you want to invest in this NFO, you have to follow the steps below.

  1. Log in to your Groww account. If you are a new user,  sign up first– it is completely online and takes 2-3 working days.
  2. Decide the amount you would like to invest in ICICI Prudential Bharat Consumption Fund- Series 2.
  3. Email Groww support on support@groww.in with a request or call/Whatsapp on 9108800604.

Factors in Favour of this NFO

1) Demographics: Half of India’s population is in the working age and the proportion of nuclear families with higher consumption is increasing.

2) Economic Growth: The share of affluent families with an annual income of Rs 10 to 20 lakhs in total consumption is also increasing.

3) Rural Catch-up: Rural consumption is increasing due to the government’s programmes. The spread of mobile telephones is also lifting aspirations in rural parts of our country.

4) Consumption: Consumption is more resilient to economic downturns than investment. This makes consumer scrips good defensive picks.

Investment Strategy of ICICI Prudential Bharat Consumption Fund

Being a close-ended sector fund ICICI Prudential Bharat Consumption Fund will majorly invest into equity and equity related instruments of companies that will directly or indirectly gain from the consumption and associated activities.

The fund may follow both value and growth style of investing to build the portfolio. It will follow an unbiased approach and invest across the market in large-cap, mid-cap and small-cap companies.

The fund will invest up to 80% of its net assets into equity and equity related instruments of companies benefiting from consumption and associated activities.

It may allocate up to 20% of its net assets in equity instruments of companies other than consumption sector. It is also compulsory to invest up to 20% of its net assets into debt and money market securities.

The fund may also invest in other funds managed by the mutual fund or in the funds of any other mutual funds as permitted by the regulator.

However, funds under the management of other asset management companies shall not be more than 5% of the Net Asset Value of the fund. It can invest up to half of its funds in derivatives i.e futures and options or foreign Exchange Traded Funds or American Depository Receipts and Global Depository Receipts.

Benchmark of ICICI Prudential Bharat Consumption Fund

The Nifty India Consumption Index has a diversified portfolio of companies representing the domestic consumption sector which includes sectors like Consumer Non-durables, Healthcare, Auto, Telecom Services, Pharmaceuticals, Hotels, Media & Entertainment, etc. comprises of 30 companies listed on National Stock Exchange such as Hindustan Unilever (HUL), ITC, Mahindra & Mahindra, Maruti Suzuki, Asian Paints and Hero Motocorp.

It represents about 17.5% of the free float market capitalization of the stocks listed on NSE and 63.7% of the free float market capitalization of the stocks forming part of the Consumption sector universe as on March 31, 2016.

Fund Manager of ICICI Prudential Bharat Consumption Fund

The fund will mainly be managed by Mrinal Singh who manages many other funds ICICI Prudential Equity Funds such as ICICI Prudential Value Discovery, ICICI Prudential Growth and ICICI Prudential Select Large Cap Fund.

He has been with ICICI Prudential mutual fund house for the past 10 years and worked with Wipro and Bosch before that.

The fund’s precursor, ICICI Prudential Bharat Consumption Fund Series 1 has various fund managers. They are Sankaran Naren who is the Chief Investment Officer (CIO) of the AMC and Atul Patel who also manages the mutual fund house’s multi-cap and balanced funds.

Priya Khandelwal will manage the American Depository Recipts and Global Depository Receipts exposure of both funds. She manages ICICI Prudential US Bluechip Fund and other internal equity funds of the mutual fund house.

ICICI Prudential Bharat Consumption Fund Suitable For

  • Long-term wealth creation
  • A close-ended equity fund that focuses to give capital appreciation by investing in a well-diversified portfolio of scrips that could gain from growth in consumption and associated activities.

Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

Liquidity:

No redemption or repurchase of units shall be allowed prior to the maturity of the scheme.

Investors wishing to exit may do so, only in demat mode, by selling through BSE Limited or any of the stock exchanges where units of the scheme will be listed as the Trustee may decide from time to time.

ICICI Prudential AMC

ICICI Prudential Asset Management Company Ltd. is the biggest asset management company in the country, focused on reducing the gap between savings & investments and creating long-term wealth for investors through a range of simple and relevant investment solutions

The AMC is a joint venture between ICICI Bank in India and Prudential Plc, one of UK’s largest players in the financial services sectors.

With its Corporate Office based in Bandra Kurla Complex, Mumbai, India the AMC has witnessed substantial growth in scale; from 2 locations and 6 employees at the inception of the joint venture in 1998, to a current strength of more than 1000 employees with around 120 locations reaching out to an investor base of more than 1.9 million investors

ICICI Prudential AMC has introduced products aligned to meet customer needs leading to a well-diversified portfolio of mutual fund products.

Mutual Fund ICICI Prudential Mutual Fund
Setup Date Oct-13-1993
Incorporation Date Jun-22-1993
Sponsor Prudential Plc and ICICI Bank Ltd.
Trustee ICICI Prudential Trust Ltd.
Chairman Ms. Chanda Kochhar
CEO / MD Mr. Nimesh Shah
CIO Mr. S Naren
Compliance Officer Ms. Supriya Sapre
Investor Service Officer Mr. Yatin Suvarna
Assets Managed Rs. 305739.20 crore (Mar-31-2018)

Conclusion:

Consumption is something which will always be there in India and is tough to market declines. However, consumer stocks also tend to trade at very high valuations. A lot will depend on the skill and scrip picking ability of the fund manager.

A vital argument for closed-ended schemes is that the fund manager will invest more efficiently without the risk of large outflows. However, this is less true in consumer good companies that tend to be large and liquid.

Investors should invest in the fund if they want to avoid the temptation and stress of jumping in and out of open-ended sector funds. If investors want liquidity then they opt for an open-ended scheme.

Happy investing!

Disclaimer: the views expressed here are of the author and do not reflect