New is always interesting, and investment ideas are no exception. This explains why two new categories which have emerged in India’s investment landscape –defence funds and dividend yield funds – have piqued investor interest. These are HDFC AMC's recently launched Defence Sector Fund and SBI's dividend yield fund.
Mrin Agarwal, Financial Educator & Director at Finsafe India spoke to CNBC-TV18 regarding these investment pockets, assessing their viability and suitability for different investors.
When questioned about the prospects of sector-specific funds like the Defence Sector Fund, Mrin Agarwal expressed some cautious views. She highlighted buyer concentration risk associated with this fund, as the government serves as the largest buyer in the defense sector.
"Any changes in government policies or procurement decisions could have significant implications for the fund's performance," Agarwal said.
According to her, the defence sector fund is specifically designed for knowledgeable investors who comprehend the intricacies of investing in the defense sector. It falls under the high-risk category due to its nature as a sector fund.
“It's meant for investors who understand the sector and is ready to take some risk. Since it is a sector fund, it is going to be very concentrated and one has to really wait and watch how this particular theme works out,” she added.
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Another fund that has garnered significant attention is SBI's dividend yield fund. Talking about this fund, Agarwal acknowledged that all funds, including dividend yield funds operate within a thematic framework.
However, predicting the emergence of the best performer from a particular theme or sector is inherently challenging.
When it comes to business cycle funds, Agarwal emphasises the need for accurate identification of business cycles and relevant portfolio allocation as the key factors for success. She highlighted that a majority of the existing funds have struggled to outperform benchmarks. Additionally, many of these funds have been burdened with high expense ratios.
Therefore, understanding the intricacies of business cycles and making informed portfolio decisions are crucial for investors aiming to navigate this specific investment strategy effectively.
First Published: May 23, 2023 4:50 PM IST
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