HDFC MF stops lumpsum flows into Realty Index fund; caps SIPs
HDFC Mutual Fund has stopped fresh investments in the HDFC Nifty Realty Index Fund days after it was opened up for further investment and redemption post the New Fund Offer period. The NFO started on March 7 and closed on March 21. It resumed subscriptions and redemptions on April 2.
The fund house on Wednesday said it will stop accepting lumpsum investments into HDFC Nifty Realty Index Fund from April 8. The restriction also applies to systematic investment plans (SIPs) and topups, which will be limited to ₹1 lakh a month per investor (identified by PAN).
However, it said systematic transactions registered prior to the Effective Date shall continue to be processed. The restriction on inflows into the passive fund has perplexed investors as unlike other actively managed funds, which are bound to derive alpha, the HDFC Nifty Realty Index Fund has to only deliver returns equivalent to that of Nifty Realty index by investing in stocks that constitute the index.
The index has 10 realty stocks with DLF having the highest weightage of 29 per cent, followed by Macrotech Developers at 14 per cent, Godrej Properties and Phoenix Mills. The decision comes after a significant 135 per cent surge in the Nifty Realty Index in last one year. The index touched an alltime high of 959 points on Tuesday but closed down 3 per cent at 925 points on Wednesday due to profit booking.
HDFC Mutual Fund is the thirdlargest asset management company in India in terms of assets, with average assets under management of ₹6.13lakh crore as of Marchend.
Similarly, HDFC MF discontinued accepting lumpsum investments in its HDFC Defence Fund last June owing to a limited number of defence sector stocks.
The scheme was launched on May 19 and its new fund offer period closed on May 30. The fund house has also imposed restrictions on the maximum investments through systematic investment plans of ₹10,000 per month. The scheme had a universe of 21 stocks, which are largely mid and smallsized companies and valuation of these companies had runup sharply.
TATA TECHNOLOGIES (BUY)
Target: ₹1,370
CMP: ₹1,134.10
Tata Technologies announced a joint venture with the BMW group. The JV entails building a software hub with 1,000+ resources offering automotive software and digital engineering services for the BMW group. Our back of the envelop calculation indicates the JV, at steady state, could add 45 per cent to our current earnings estimates.
Nearterm earnings upside aside, the implications of the deal seem far reaching to us. It allays concerns that Tata Tech’s parentage is a hurdle in getting business from traditional OEMs. Further, an automotive software partnership with BMW establishes Tata Tech’s credentials in software ER&D, augmenting its full vehicle engineering proposition, thus expanding addressable spend.
It is also an important marker in TATATECH’s efforts to diversify its revenue mix from anchor clients. Importantly, the JV corroborates the argument that rising software complexity and multiple constraints facing OEMs can trigger multiyear offshoring wave. The trend, though still early, seems undeniable.
With capabilities now spanning the entire spectrum of OEMs’ ER&D spend, comparable valuations are justified, in our view. Tata Tech is well positioned to ride it.