Saturday, April 6, 2013


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Analysis of  IDFC Equity Opportunities - Series 1 NFO
IDFC Mutual Fund is coming out with a New Fund Offer on 9th April namely IDFC Equity Opportunity Fund. The Fund will be a 3 year Close Ended Fund. The Fund will aim to invest in Small and Mid cap fund.

  1. IDFC Equity Opportunity Fund will be investing in small and mid cap and hence I would categorise the fund as a High Risk High Return fund.
  2. IDFC, as a Fund House, enjoys a good reputation of investing in mid cap space.
  3. The Fund will limit its size to 125cr as the Fund House feel this will ensure investors make early returns in the next cycle.
  4. The Fund is a Close ended fund.
  5. Fund will have a diversified portfolio of 60-80 stocks. The key for diversification is to manage liquidity/risk considerations and play across sectors.
  6. The most interesting aspect of this NFO is that there is NO Growth Option and there is COMPULSORY DIVIDEND option.

  1. The 3 year lock in allows the Fund Manager the to buy and hold stocks and not worry about the daily NAV as well as any Redemption Pressures.
  2. The Fund Manager Kenneth Andrade has gained reputation of identifying small caps which has the potential to become Larger Mid Caps. Some notable examples being Page Inds, Kaveri Seeds among others.

  1. Star Fund Manager Kenneth Andrade besides managing the highly successful IDFC PREMIER EQUITY FUND also manages like IDFC 50-50 Equity Fund, IDFC Infrastructure Fund, IDFC Equity Fund whose performance is nothing to boast of.
  2. Small Caps and Mid Caps tend to be highly volatile and investing in SIP way would be the BEST method to negate the volatility but sadly this NFO does not give this option as this is a Close ended fund and hence no SIP option.

IDFC is advertising this Fund as “an opportunity presenting itself after a decade”.

Sure opportunity is there, but why should I do go for a Close ended fund when I can do the same with a Open ended fund which I can always switch if the Fund is inconsistently performing poorly which i cannot do with a Close ended fund as this NFO is?
The Fund is for investors who are ready to take High Risk in pursuit of High Returns. Even then, I would prefer investing in proven small cap funds like Religare Mid n Small Cap Fund, Mirae Asset Emerging Bluechip Fund, DSP Small and Mid Cap fund, etc  rather than risking some more by going for a NFO, that too close ended.
My advise.........AVOID.  If you still want to invest in this fund, ensure that your expose is limited to 5% of your overall portfolio.
Best of luck,
Srikanth Matrubai

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Friday, April 5, 2013


Albert Einstein called "Compounding" as the 8th Wonder of the World.
Let us find out why with another example.

power of compounding

There are 'n' number of stories on the Power of Compounding. But the one which I like the most is this...

You may know the story, but still read it because the twist at the end is not what you expected.
3 persons, Mr.A, Mr.B and Mr.C joined a company. They all were given the option of either taking Rs.10000/- daily for next 30 days or taking 1paisa for Day 1, 2 paise for day 2, 4 paisa for Day 3, 8 paisa for Day 4....wherein double the amount what you got previous day and henceforth for the next 30 days.
Mr.A decided to take Rs.10000/- daily.
Mr.B and Mr.C decided to take 1 paisa and the double the amount every day.
At the end of 20th (twentieth) day, Mr.B badly needed urgent cash and took away Rs.10000/- from his accumulated corpus.
At the end of 30 days,
Mr.A's total amouted to Rs.3 lakhs (Rs.10000 * 30)
Mr.B who took Rs.10000/- on 20th, was however better than Mr.A and had Rs.5 Lakhs at the end of 30 days.
Mr.C who did not withdraw anything, had at end of 30 days, surprise, surprise, left with Rs.1 Crore!!!
Just look at the difference between Mr.B and Mr.C. Both took the same salary of doubling every day but just because Mr.B took a paltry Rs.10000/- only on the 20th, he was left with Rs.95 Lakhs lesser than Mr.C.
Well, then, that is the power of compounding!!!

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