Tuesday, February 11, 2014

REVIEW OF MOTILAL OSWAL MOST MIDCAP 30 FUND

NOT A DOUBLE EDGED SWORD!

Motilal Oswal Mutual Fund has come out with its second “active” open funded fund, namely Motilal Oswal Most Focused Mid cap 30 fund. The New Fund Offer is already open and will be available for subscription till February 17.

Motilal Oswal Most Focused Mid Cap 30 Fund Background:

  • The Motilal Oswal Most Focused Mid Cap 30 Fund is a open ended equity fund which will be investing in a maximum of 30 stocks with CNX Midcap as its benchmark.
  • The Fund will be managed by Mr. Taher Badshah who is vastly experienced. He is involved in fund management since the past 19 years. 
  • Most Mid Cap funds have a portfolio comprising of average 50 stocks. This Fund has capped the portfolio at 30 stocks.

WHY MID CAPS?

  • Mid Caps are under-researched and under-owned compared to Large Caps and hence tend to give higher returns in a bull run and relatively lower returns in a bear run.
  • Motilal Oswal has a high pedigree in researching and picking up under-valued stocks. The fund could do wonders if the management team continues to pick high growth oriented stocks at a discount.
  • Mid Caps are currently trading at low valuations compared to their long term averages, thus offering a good entry point.
  • As mentioned before, Mid Caps outperform Large Caps significantly during a bull phase which is expected to occur post the General Elections.

SHOULD YOU INVEST?

There are dime a dozen Mid cap funds, so why should you invest in this Fund? You need NOT.
Hang on, I have not completed yet.
  • Being a NFO, there is no track record. Even the only other fund from Motilal Oswal’s stable, the Motilal Oswal Focused 25 fund is less than a year old. However, Motilal Oswal is an experienced equity market player and PMS manager, having an enviable record.
  • On the face of it, investing in this NFO is fraught with risks. Not only is this fund a Mid Cap fund with no track record, the fund follows a focused approach which only increases volatility.
  • However, Motilal Oswal has earned a good reputation for picking up quality mid caps at dirt cheap rates (Page Industries, Bharti Airtel, Eicher,etc) and hence you could go for the fund through the Systematic Investment Plan route, especially if you do not mind the huge volatility which this Fund will bring in.
  • SIP investment could do wonders as Mid Caps tend to rise higher than the market in a bull run and fall steeper than the market in a bear phase. Your SIP investment will help in averaging your cost.
  • The timing of the Fund is excellent since Mid caps are now available at low valuation compared to Long Term Averages, thus offering a good entry point with reduced risk. Hence, even a lump-sum investment can be considered if you are a high risk investor. However, do follow it up with either a SIP or an additional investment if the fund NAV falls by 5%.
  • Lump-sum investors, please note, the fund carries a Exit Load of 2% if redeemed within 1 year of investment. This actually could work in your favour as it demotivates you to exit the fund.
In a nutshell, if you are ready to ride the volatility associated with Mid cap funds and are impressed with Motilal Oswal’s research track record, you can invest in this fund.
My recommendation, seeing the pedigree of the Motilal group and expecting the Markets to do well going forward, the fund should do well and if you do not have a Mid cap fund in your portfolio, you can look at investing this fund.
Lumpsum investment can be done with modest amount. 
However, conservative investors should invest via the SIP route.
 Most importantly, through both the routes — SIP and lump-sum, it is recommended that you stay invested for at least 3 years.




Most so called "experts" blindly run down a New Fund Offer, however good it may be.
They pride themselves on criticising a NFO.
What everyone misses is that even the BEST performing fund was once a New Fund Offer. Isnt it??

If you look at any leading website like say Moneycontrol, Valueresearch, you will find that the top performing funds for the past 1 year has been
Mirae Asset India Opportunities fund
BNP Paribas Equity Fund
Edelweiss EDGE Top 100 fund
Axis Equity Fund
and all these funds  were not even in the market 5 years back. Some not even 3 years back.
So, if an investor had taken these "experts" word seriously and avoided investing in these funds and waited for these websites to give STAR ratings, he would lost an opportunity to ride on the gains made by these funds.
So, friends, having made my point regarding NFO., I strongly suggest you to go ahead and invest in Motilal Oswal Most MidCap 30 Fund.

Happy investing.


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