Name of the new fund offer (NFO)
Birla Sun Life India Reforms Fund
What is this about?
It is a thematic equity fund that will invest in companies that would benefit from India’s reforms process initiated in 1991. Sectors such as telecom, banking, power and education, have benefited from reforms. The fund would avoid sectors such as metals and information technology, where, at present, there aren’t much reforms happening.
Emerging economies such as India that attract foreign investment can’t ignore reforms. For instance, lack of power supply, better road connectivity, disinvestment and reduction of subsidies are the need of the hour. There’s little that can go wrong with it in the long run.
The progress of reforms has been slow in some sectors such as oil and power. Government will is crucial and anti-reform lobbies have a strong presence. In the past, too, equity markets have punished stocks of companies marred by negative news on reforms, such as failed attempts at disinvestment. It is promising, but the path is a long and arduous one.
Money Matters take
India cannot progress without reforms. However, it’s unfair to assume that existing diversified equity funds are completely—or even significantly—devoid of companies that benefit from reforms. So expect overlap of portfolios between the NFO and other diversified funds. Also, the new fund is a thematic fund and will invest only in a few companies and sectors. It’s best to wait for the fund to build a track record first.