HDFC Mutual Fund launched a non-cyclical consumer fund.This his NFO will be available for subscription on his 23rdrd Closed on June 7thth July 2023. It will resume 5 business days after his initial NFO period. Should You Invest in the HDFC Non-Cycling Consumer Fund?What are the risk factors an investor should consider before investing in such an NFO?
Also read: Can 50,000 SIP in mutual funds create 100,000 crore wealth?
What is an acyclical consumer theme?
Non-cyclical consumer themes refer to industries or sectors that are less affected by business cycles and are considered relatively stable or resilient regardless of overall economic conditions. Non-cyclical consumer goods and services are often in demand regardless of economic downturns because they meet basic needs or provide essential products and services. Examples of non-cyclical consumer sectors include essential services such as healthcare, food and beverages, household goods, utilities and telecommunications. These industries tend to be less sensitive to changes in consumer spending and can offer more stable investment options during times of economic uncertainty.
HDFC Non-Circular Consumer Fund – Details on NFO Issues
| NFO period | From 23 June to 7 July 2023. |
| Schemes for continuous purchases/sales are reopened | Within 5 business days |
| Minimum application amount | 100 rupees, thereafter in multiples of 1 rupee |
| Minimum SIP | 100 rupees for 6 months |
| NAV of the fund | 10 rupees during NFO period |
| entry road | Nothing |
| end of load | 1% on redemption within 365 days |
| dangerous | very high risk |
| standard | NIFTY Indian Consumption TRI |
| fund manager | Amit Sinha |
Positive Factors of Investing in the HDFC Non-Cycling Consumer Fund
Investing in mutual funds that focus on acyclical consumer themes offers several advantages. These are general benefits and may apply to all funds investing in such themes.
Stability and Defense: The non-cyclical consumer sector is known for its stability and defensive characteristics. These sectors typically consist of companies that provide essential products and services that people need regardless of their economic circumstances. Investing in mutual funds that target these sectors can provide stability to your investment portfolio as they are less susceptible to economic downturns.
stable income and dividends: Many non-cyclical consumer companies have a history of generating consistent profits and paying dividends to shareholders. Mutual funds that invest in these sectors are attractive to investors looking for stable income as they can provide a regular stream of income through dividend payments.
Long-term growth potential: Non-cyclical consumption sectors may be less volatile than cyclical sectors, but may still offer long-term growth opportunities. Consumer trends and demographics can increase demand for essential products and services over time, increasing the capital value of companies operating in these sectors. You can participate in this potential growth by investing in mutual funds that focus on acyclical consumer themes.
Diversification: Investing in mutual funds allows for diversification among a variety of non-cyclical consumer companies. This diversification reduces the risk associated with investing in individual stocks and provides broader exposure to non-cyclical consumer themes.
the negative or risk factors of investing in such funds;
While there are advantages to investing in mutual funds that focus on acyclical consumer themes, it is essential to consider the potential risk factors associated with these investments.
Economic downturn: The non-cyclical consumer sector is considered more stable, but is not completely immune to economic downturns. During a severe economic contraction, demand for even essential products and services may decline, which could affect the performance of non-cyclical consumer companies and the mutual funds that invest in them.
Regulatory changes: The non-cyclical consumer sector is subject to various regulations and policies that can affect its operations and profitability. Regulatory changes, such as stricter compliance requirements and price controls, could impact the financial performance of companies within these sectors and, consequently, the performance of mutual funds focused on those sectors. there is.
Competitive environment: The acyclical consumer sector can be highly competitive, with multiple companies vying for market share. Increased competition, price competition, and disruptive innovation by competitors could affect the profitability and growth potential of companies within these sectors and impact the performance of mutual funds that invest in those sectors. there is.
Changing consumer preferences: Consumer preferences and trends can change over time, affecting demand for certain non-cyclical consumer products and services. Mutual funds focused on these sectors may be exposed to the risk of investing in companies that are unable to adapt to evolving consumer preferences, which could result in reduced demand and negatively impact the fund’s performance. There is a nature.
Company-specific risks: Each company in the non-cyclical consumer sector may have its own set of risks, including operational issues, product recalls, supply chain disruptions and legal issues. These company-specific risks can affect the performance of a mutual fund if it makes significant allocations to certain companies.
Market Volatility: Although non-cyclical sectors are generally considered to be less volatile than cyclical sectors, market volatility can still affect the performance of mutual funds in these sectors. Factors such as interest rate changes, geopolitical events, and investor sentiment can affect the overall market and, in turn, the performance of non-cyclical consumer mutual funds. .
Performance of consumption-themed investment trusts
There are consumption-themed mutual funds out there today, and here’s how they’ve performed over the past three to ten years. These funds have generated returns ranging from 10% to 35% annually.
| scheme name | 3 years | 5 years | 10 years |
|---|---|---|---|
| Japan India Consumption Fund | 30% | 18% | 15% |
| Kanara Robeco Consumer Trends Fund | 28% | 16% | 18% |
| Mirai Asset Great Consumer Fund | 29% | 16% | 19% |
| Aditya Birla Sun Life India GenNext Fund | 26% | 15% | 18% |
| SBI Consumption Opportunity Fund | 35% | 15% | 16% |
| Tata India Consumer Fund | twenty five% | 12% | – |
| Japan India ETF Nifty India Consumption | 20% | 11% | – |
| Sundaram Consumption Fund | twenty three% | Ten% | 16% |
| UTI Indian Consumer Fund | 19% | Ten% | 12% |
| Baroda BNP Pariba Indian Consumption Fund | twenty four% | – | – |
| ICICI Prudential Bharat Consumption Fund | twenty three% | – | – |
Also read: Mutual funds performing well in 9 out of 12 months
Should I invest in the HDFC Non-Circulating Consumer Fund?
There are pros and cons to investing in the HDFC Acyclical Consumer Fund as a new fund proposition.
On the positive side, the mutual fund focuses on non-cyclical consumer sectors that tend to be more resilient during economic downturns. This could allow investors to diversify their portfolios and benefit from steady growth in essential consumer goods and services.
However, as a new fund it has no track record, making it difficult to assess potential returns. Economic downturns, regulatory changes introducing compliance requirements, and changes in consumer tastes and trends could reduce demand for certain products and services and put the fund’s performance at risk.
Investors should carefully consider the Fund’s investment strategy and risk factors before making any investment decision.
Source data: HDFC Acyclical Fund SID From the SEBI website
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