Page 18 - Banking Finance December 2020

MUTUAL FUND

Mutual Fund

News

HDFC Mutual Fund Further, dividend paying companies are Agarwal is likely to implement in the
mostly mature and less volatile busi- small cap fund as well. Traditional
Launches HDFC Dividend nesses. These companies may be gen- value investing seeks to buy companies

Yield Fund erating healthy cash flow. According to that are priced cheaply compared with
HDFC Mutual Fund has launched HDFC the fund house, low Interest rates metrics such as earnings or book value,
Dividend Yield Fund, an open-ended make high dividend yield stocks attrac- but this philosophy has struggled
equity fund that will invest predomi- tive. Also, current polarized valuations against growth investing (buying fast
nantly in stocks of dividend yielding make high dividend yielding stocks at- growing but more expensively valued
companies. The scheme will look to tractive and due to change in taxation, companies) for several years.
invest in companies with a consistent many companies are opting for buy With other small cap funds such as SBI
track record of paying dividends at the back which can be a good way to re- Small Cap closing themselves for lump
time of investment and companies with ward shareholders and improve the sum subscription, there is a strong el-
valuations of these companies, said the
a dividend yield higher than Nifty 50 ement of doubt about whether this is
release.
index. The scheme will be market cap the right time to invest in a small cap
and sector agnostic. fund. SBI MF continues to accept SIP
UTI MF launches small cap
Dividend yield is a good valuation indi- (systematic investment plan) flows up
cator and companies that have high fund to Rs.5,000 in the scheme.

dividend yield represent good cash flow With markets making new highs in According to the UTI MF presentation,
in business and management commit- November, mutual funds have started the price to book ratio of the Nifty
ment towards shareholders. Also, such launching new schemes with gusto. Small Cap 250 Index at 2.20 is close to
companies have a higher Return on UTI Small Cap Fund is set to launch its long run average of 1.98 and the
Equity (ROE), said the release from the today (2nd December). The fund will be dividend yield at 1.76% is a little higher
fund house. Dividend yield is a financial managed by Ankit Agarwal, the fund than the long term average of 1.61%.
ratio that shows how much a company manager of UTI Midcap Fund. Accord- Experts typically look at market capi-
pays out in dividends/buyback each ing to data from Value Research, UTI talization as a more accurate long
year relative to its stock price. Midcap under performed the S&P BSE term measure of valuation. Here the
NIFTY Dividend Opportunities 50 TRI Midcap 150 over the past 3 and 5 answer is inconclusive. The small cap
years. However, to be fair to Agarwal, share in the Nifty 500 is at 6%. It is not
(the benchmark) has delivered a CAGR
the fund has outperformed since he as large as the 8% seen in October
of 9.70% for the period 1st Oct'07 to
took over the reins in August 2019. 2017 but not as cheap as it was in
30 th Oct 2020. Further, over the last
13 years, NIFTY Dividend Opportunities Much of the revival has come from a October 2013 at 4%.
50 TRI has outperformed NIFTY 50 TRI shift in the fund's strategy from value According to the UTI MF presentation,
by a CAGR of 2% to growth investing, a strategy that the fund will maintain a roughly 65-

18 | 2020 | DECEMBER | BANKING FINANCE