Mutual Funds
Union KBC Focussed Equity Fund: A few sour stocks can cause the scheme returns to plummet

Investing in a few stocks means high risk and depends more on the fund managers’ views of a particular sector and stock. A wrong call would mean sub-standard returns

Most equity diversified schemes invest in a portfolio of over 40 stocks. The new scheme—Union KBC Focussed Equity Fund—planned to be launched by Union KBC Mutual Fund proposes to invest in 20-30 equity stocks. Other diversified equity schemes on an average invest in a portfolio of 40 or more stocks. The more diversified a portfolio is, the lower is the systematic risk. Investing in a few stocks increases the risk associated with individual assets. Therefore, if a few stocks fail to deliver, the returns of the entire portfolio is affected. In a well diversified portfolio the underperformance of few stocks has a little impact on the overall performance of the scheme.

In our analysis of the April portfolio of equity diversified schemes having a corpus above Rs100 crore, out of the 111 schemes we found that just 14 schemes invest in 30 stocks or less. Six of these schemes have underperformed the benchmark over the one-year period as on 30 April 2013. The schemes which underperformed the benchmark included HDFC Focussed Large Cap Fund and DSP BlackRock Focus 25 Fund. ICICI Prudential Focused Bluechip Equity Fund which has a corpus of above Rs4,000 crore was able to outperform its benchmark. The other ‘focussed’ scheme present on the list was Axis Focus 25 Fund. This scheme is recently launched and has a track record of less than a year. HDFC Focused Large-Cap Fund and IDFC Imperial Equity Fund which invest in 20-25 stocks underperformed the benchmark by over 3%. The above performance just goes to show that it is a difficult task to produce benchmark beating returns by investing in a small basket of stocks.

The scheme would invest 75%-100% of its assets in equities and the rest in short-term debt and money market instruments. The performance of the scheme would be benchmarked to the S&P BSE Sensex. Selecting a few winning stocks is a skill very few have mastered. Picking the right stock at the right time would be crucial for the performance of the new scheme. Union KBC MF has a fund management history of less than three years. Its first and only open-end equity diversified scheme— Union KBC Equity— was launched in June 2011. The returns of the scheme over the period have been in line with its benchmark. Over the year it has delivered a return of 15.57% whereas the S&P BSE Sensex has delivered a return of 15.07%. However, the equity management of the fund house has a short track record of performance.

The scheme would be managed by Ashish Ranawade who has 14 years of experience in investments.


Minimum Application Amount:

Rs25,000 and in multiples of Re1 thereafter


For Systematic Investment Plan (SIP):

Rs1,000 and in multiples of Re1 thereafter (for monthly frequency)

Rs3,000 and in multiples of Re1 thereafter (for quarterly frequency)


Minimum additional amount for purchase/switch in:

Rs1,000 and in multiples of Re1 thereafter

Expense ratio:

Maximum total expense ratio (TER) permissible under Regulation 52(6)(c)(i) and (6)(a): Up to 2.50%**

Additional expenses under Regulation 52(6A)(c): Up to 0.20%~

Additional expenses for gross new inflows from specified cities under regulation 52(6A)(b): Up to 0.30%#


Exit load:

1% if redeemed/switched out within one year from the date of allotment. Nil thereafter



Srikanth Shankar Matrubai

4 years ago

Focusses Funds are like a Double Edged sWord.
They can cut both ways.

SEBI extends new fund offer period to 30 days for RGESS

In a circular dated 19th June, SEBI announced that the subscription period of an NFO of a mutual fund scheme under the Rajiv Gandhi Equity Savings Scheme would remain open for 30 days, against 15 days for other schemes


The Securities and Exchange Board of India (SEBI) has notified regulations that allowed mutual funds to accept investor money in new plans under the Rajiv Gandhi Equity Savings Scheme (RGESS) for 30 days, as against a 15-day subscription period allowed for other schemes.

The relaxation has been made only for mutual fund schemes under RGESS, a government initiative aimed at attracting small investors into the capital market.

In a circular dated 19th June, SEBI announced that the subscription period or the window, for which a new fund offer (NFO) of a mutual fund scheme remains open, has been extended to 30 days. Generally, an NFO remains open for a period of 15 days.

Besides, SEBI said the timeframe for RGESS mutual funds allocating the refund money and issuance of statements by mutual fund houses would be 15 days from the closure of the initial subscription. The deadline remains at five days for other mutual fund schemes.

The notification comes into effect immediately. Under the scheme, announced in the 2012-13 Union Budget, new investors putting in up to Rs50,000 in the stock market and whose gross total annual income is less than or equal to Rs10 lakh, can avail tax benefits.

The scheme encourages flow of savings into financial instruments and improves the depth of the domestic capital market. The scheme was notified by the department of revenue, finance ministry in November 2012, following which SEBI issued the guidelines.

As per the notification issued by SEBI on RGESS, there would be a lock-in period of one year on investments made under the scheme.


Commodities transaction tax to come into effect from 1st July

Besides gold, silver, crude oil and base metals, processed farm items like sugar, soya oil and guar gum will come under CTT, according to the notification from the finance ministry


Commodities Transaction Tax (CTT) will be levied at 0.01% on various non-agricultural commodities, including gold, sugar and edible oils, with effect from 1st July.

Notifying the CTT today, the finance ministry said 23 agricultural commodities, including wheat, barley, chana, cotton and potato, would be exempted from the levy.

The tax would be levied on futures trading and not on spot trading in the commodities. Besides gold, silver, crude oil and base metals, processed farm items like sugar, soya oil and guar gum will come under CTT. Coriander, cardamom and guar seed is also out of CTT.

In the 2013-14 Budget speech, finance minister P. Chidambaram had said that the commodity transaction tax will be levied on non-farm items at the rate of 0.01% and would be paid by the seller.

According to sources, the implementation of CTT has been delayed as there have been consultations between the stakeholders and the finance ministry over the list of non-agri commodities to be brought under the ambit of CTT.

Exchanges and brokers are of the view that CTT would discourage day traders and speculators, resulting in a big drop in business of five national bourses.

There are 22 commodity bourses in the country, of which six of them operate at national level. The combined turnover of these bourses stood at Rs1,70,46,840 crore in 2012-13, down by 6% from the previous fiscal.

Of the total turnover, more than 80% comes from non-agricultural commodities.


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