Betting big on the rural economy, which contributes 46 per cent of national income and constitutes 70 per cent of total workforce, Mahindra AMC launched its Mahindra Rural Bharat and Consumption Yojana on Tuesday. It is an open ended equity scheme based on the Rural India theme and is suitable for investors who are seeking long-term capital appreciation through investment predominantly in equity and equity-related securities, including derivatives of entities engaged in and/or expected to benefit from the growth in rural India. However, there can be no assurance that the investment objective of the scheme will be achieved.
“We expect India’s higher GDP growth to be contributed by positive demographic dividend and improvement in consumption pattern from Rural India. ‘Mahindra Rural Bharat and Consumption Yojana’ provides investors an opportunity to participate in India growth story predominantly in rural India by investing in well diversified equity portfolio of fundamentally strong, and well-known companies. We believe the scheme offers an attractive long-term investment opportunity. Hence, investors seeking higher capital appreciation from their investment should consider participating in Mahindra Rural Bharat Yojana,” said Ashutosh Bishnoi, MD & CEO, Mahindra Mutual Fund, while announcing the launch of the scheme.
It is an open-ended fund having NFO period of October 19, 2018 to November 2, 2018. The scheme will be reopened for continuous sale and repurchase within five business days from the date of allotment. The benchmark of the scheme is Nifty 200 Index.
The minimum application amount as well for the amount additional purchase is Rs 1,000 and in multiple of Re 1 thereafter. Although there is no entry load, but an exit load of 1 per cent is payable if units are redeemed or switched out till one year from the date of allotment.
The scheme will invest 80 to 100 per cent of the fund in high-risk equity and equity-related instruments of entities having exposure towards rural India and up to 20 per cent in equity and equity-related instruments of entities other than having exposure to rural India. While up to 20 per cent of the fund will be invested in low- to medium- risk debt and money market securities (including CBLO, Reverse Repo, etc), another 10 per cent or less will be used to buy medium- to high- risk units issued by REITs & InvITs.
As the scheme invests predominantly in equity, taxation of equity investments will be applicable on it. If the amount invested is withdrawn withing one year from the date of investment, 15 per cent tax will be charged on the amount of short term capital gain (STCG), if any. On the other hand, if the amount is withdrawn after one year from the date of investment and the long-term capital gain (LTCG) exceeds Rs 1 lakh in a financial year, 10 per cent tax will be levied on the excess gains.
Apart from the risks associated with investments in equities, the scheme also faces specific risk of crop failure due to vagaries of nature such as erratic monsoon, drought, cyclical/seasonal factors etc. The scheme will also face performance risk due to a variety of market and economic activities, government policies, global economic changes, currency fluctuations, tax policies, political changes, corporate actions and investors’ behaviour etc.
Although few rural-economy specific schemes, which have been launched so far, are doing well, but investors having long-term investment horizon with high risk appetite and knowledge of equity investments should go for this high-risk scheme.