HDFC Housing Opportunities Mutual Fund NFO: Should you invest?

Increased urbanization, nuclearisation of families, rising disposable income, low interest rates, changing landscape, implementation of RERA law and favorable government rules and regulations (Housing for All by 2022) are pushing the demand for housing in India. It is believed that the growth in the housing industry, will lead to a spurt in other allied sectors too like cement, paints, electrical, tiles and sanitary ware, adhesives, appliances, and many more. It is because of all these prospects HDFC Housing Mutual Fund launched its NFO.

HDFC Housing Opportunities Fund Review

It will be a close ended scheme that will be available for 1140 days. HDFC Mutual Fund NFO will invest majority of the (80-85%) stake in equities of housing and related sectors. The scheme will be developed by the fund house in association with a group company NSE. The index will have a portfolio of 50 stocks, with a cap of 10% on its holdings and industry cap of 20%.

The fund will be actively managed by the insiders and hence it might be overweight or underweight in relation to the index. How much can an investor buy and when to buy, these questions will be decided based on the prevailing market sentiments. HDFC NFO 2017 will feature the benefit of downside protection by using the derivatives. Rao Ravuri the fund manager of HDFC NFO explains it further:

“By buying put options at a later date, we would be funding it out of profits made, rather than funding it out of cost by buying upfront.”

What’s in the storehouse for the investors?

HDFC Fund, is one among top 10 mutual fund investment company that offers its investor a safety net, which means the fund manager will invest its proceeds in large cap/mid cap and small cap stocks, depending upon the market conditions. Downside protection is another positive factor.

Scheme Details
Fund Type	Close Ended Thematic Equity Scheme
NFO Period	Nov 16, 2017 – Nov 30, 2017
Benchmark	India Housing and Allied Businesses Index
Tenure	1140 days from the date of the allotment of the units
Fund Manager	Mr. Srinivas Rao Ravuri
Allocation (%)	Equity (Housing and allied): 80-100% Equity (Other than housing and allied): 0-20% REITs and InvITs: 0-10% Debt and Money market instruments: 0-20%
Minimum Allocation	Rs 5,000 and in multiple of Rs 10 thereafter.

Should you invest?

However, the investors should keep in mind that government measures to incentivize the housing sector, and implementation of the GST law, has given a positive signal to the housing stocks, but the investors should invest their money in this fund at their own risk because though the fund will invest in multi-cap profile, but it will purchase Nifty 50 options.

Secondly, the Hedge through the put option will not protect the investors fully from the risks but will limit it. Thirdly, being a close ended fund, the investment will be locked in for certain period and hence the fund would score low on liquidity.