Equity mutual funds are so named because of their focus is to invest in market traded equity stock. In the case of diversified equity mutual funds, exposure to a specific sector or market cap is prevented such that sector-specific market movements do not significantly impact the value of the mutual fund’s portfolio. Additionally, the diversified fund would ensure diversity in terms of market capitalization as well in order to balance the risk as well as the growth of the mutual fund. However, many equity funds often witness a bias towards investing in large and giant cap companies in order to ensure that the risk and returns of the fund are balanced. Additionally, a smaller portion of the portfolio of many equity funds consists of relatively liquid investment options such as cash/call, debt instruments, and other money market instruments. The availability of liquidity is essential to help the fund make the most of the investment opportunities that may be missed due to the inherent illiquidity of equity investments.
ICICI Prudential Value Discovery Fund is among the most popular open-ended equity funds that are currently managed by ICICI Prudential Mutual Fund AMC. This diversified equity fund aims to provide investors with the opportunity to invest in various stocks that are available at a price point, which is relatively discounted when compared to the value of the investment. Attempts to achieve this would be through a process of “Discovery”. The key to this “Discovery” process is the identification of companies that feature effective management, strong business fundamentals and most importantly have equity on offer that is available at a reasonable price point.
Investment objective of ICICI Prudential Value Discovery Fund
The ICICI Prudential Value Discovery Fund is designed to provide long-term capital appreciation to its investors. In order to provide the greatest degree of value to its investors, the mutual fund would adopt a bottom-up strategy in order to ensure identification and selection of suitable investment choices for the mutual fund. Some of the key criteria expected to be considered by the fund manager and his team at the time of stock selection would include dividend yield, book value, earning price and price of the equity being considered. A great deal of time and effort will be devoted to doing in-depth research in order to ensure that the portfolio built based on this stock picks is highly diversified across market capitalization as well as sectors.
Investment Strategy Overview of ICICI Prudential Value Discovery Fund
In order to mitigate the risk of investing in market-traded equities, the fund will focus on diversifying its investments across various market capitalization in order to mitigate the risk from exposure to a specific section of the market. Additionally, sector specific investments will also be avoided such that changing circumstances in a specific economic sector does not adversely affect the performance of the mutual fund. The stock selection for inclusion into the fund’s portfolio would also be made keeping in mind that such investment choices are companies with high growth potential that are currently reasonably priced on the stock market.
Risk Profile of ICICI Prudential Value Discovery Fund
The ICICI Prudential Value Discovery Fund is considered to be a mutual fund featuring moderately high risk and the potential for a high degree of market appreciation as a result of its exposure to equity markets. The investor must keep in mind that investments made into this fund feature various risks including risk to the principal amount invested. Some of the key risks to investments made into the fund include the following:
- The risk from market exposure as the fund would primarily invest in equities of companies across various sectors and market capitalization.
- The risk of illiquidity as it might not always be convenient to liquidate existing investment in order to invest in other higher growth schemes especially when the markets are witnessing a bear run.
ICICI Prudential Value Discovery Fund Information and Statistics
Launch Date: This fund was first made available for investment to the individual investor on the 16th of August 2004.
Fund Type: The ICICI Prudential Value Discovery Fund is an open-ended diversified equity fund. Therefore, any investor can start investing in the fund at any time and the same goes for the redemption of the fund units. Being a diversified fund, the investments are market cap agnostic as well as spread across multiple sectors.
Minimum Investment: A new investor interested in the ICICI Prudential Value Discovery Fund can get started with initial investments as small Rs. 1000 as a lump sum or in multiples of Re.1 thereafter. Additional purchases in the scheme are also allowed with amounts of Rs. 500 and multiples of Re. 1 in addition to the initial Rs. 500. In the case of SIP investments, the monthly minimum investment is Rs. 500 per month for at least 6 months. In the case of quarterly SIP, the minimum investment is Rs. 5000 per quarter over a period of 12 months.
Risk Category: Being an equity oriented fund, the ICICI Prudential Value Discovery Fund features a high degree of dependence on changing market conditions. Moreover, equities are believed to be relatively illiquid investments, which further enhance the risk of the investment. Due to these and other related reasons, this mutual fund is classified as moderately “Moderately High”.
Entry/Exit Load: The ICICI Prudential Value Discovery Fund does not feature any entry load as per a RBI directive, which has made the use of entry loads illegal in the case of mutual fund investments. Exit load is, however, applicable to 1% in case the fund units are redeemed or switched prior to completion of 1 year from the time of allotment of the units in question. The amount is calculated on the basis of the total redemption value of the units.
Fund Manager: The fund is currently managed by Mrinal Singh, who is the Deputy Chief Investment Officer of Equity at the ICICI Prudential Mutual Fund AMC (Asset Management Company). He has been managing the fund since February 2011 and holds an MBA from SPJIMR, Mumbai prior to which he completed a bachelor’s degree in mechanical engineering. With an overall industry experience of over 11 years, he has worked with leading players such as WIPRO Limited, Robert Bosch GmbH Motor Industries Co. Ltd. His extensive experience in diverse sectors ranging from automotive, engineering and financial makes him the most suitable choice for recognizing high-value stocks that can be availed at discounted prices across multiple sectors.
Taxation Rules for ICICI Prudential Value Discovery Fund
The ICICI Prudential Value Discovery Fund is an equity mutual fund, thus short-term capital gains taxation rules are applicable in the case of this mutual fund. In case units of the fund are held for less than 1 year from the time of initial allocation before being sold or switched, the investor is liable to pay short term capital gains at 15% of the profits made through the transaction. However, in case such units are held for over a 12 month period, the redemption amount is tax-free. This is one of the key reasons, why the ICICI Prudential Value Discovery Fund is suitable for investors who are seeking capital appreciation in the medium to long term as all such profits are completely tax exempt.
Plans and Options Available with ICICI Prudential Value Discovery Fund
Plans and Options Available with ICICI Prudential Value Discovery Fund
The ICICI Prudential Value Discovery Fund is available with 2 separate plans for individual investors – regular plan and direct plan. Each plan also features two unique options – growth option and dividend option. The following are the key features of these:
Regular Plan: This is the only plan that is available to an investor seeking to invest in the ICICI Prudential Value Discovery Plan fund through a 3rd party mutual fund investment platform. This option features a higher expense ratio as compared to the direct plans and the investor may in certain cases be charged portfolio management fees or transactions fees. However, investors who purchase this fund through Paisabazaar.com need not worry about spending additional amounts apart from the investment being made. Investors seeking to make their investment directly through the ICICI Prudential Mutual Fund AMC can opt for the regular plan as well.
Direct Plan: An investor can opt to invest in the direct plan of ICICI Prudential Value Discovery Fund in case they are investing through the ICICI Prudential AMC as well as a few select platforms. Direct plans tend to have a much lower expense ratio as compared to regular plans hence the units have to be bought at a higher NAV. However, the potential returns and price increase of the units is also higher, which translated into potentially higher returns in the long term. Many investors prefer to invest directly through the AMC and opt for the direct plan specifically because of these benefits.
Growth Option: The growth option is available to investors who are seeking to generate capital appreciation in the medium to long term. In the case of investment into the ICICI Prudential Value Discovery Fund growth option, the profits generated are invested back into the fund, which increases the AUM and thereby the NAV of individual fund units. This increase in NAV leads to an increase in the value of the total investment, which translates into a profit for the investor when he/she redeems or switches the investment.
Dividend Option: This option is preferred by investors seeking some amount of capital appreciation but mainly a relatively constant stream of income during the time they are staying invested with the fund. Dividends, however, are declared at the discretion of the fund manager and the team that too only when the fund has made a profit. When a dividend is declared, the per unit value of the mutual fund decreases by an amount equal to the dividend paid out per mutual fund unit. In case the investor has opted for dividend re-invest, the payout is automatically converted into units of equal value and added to the existing units assigned to the investor. Alternately, if the investor has opted the payout option, the dividends thus obtained are directly credited to the bank account registered with ICICI Prudential Mutual Fund AMC.
Top Holdings of the ICICI Prudential Value Discovery Fund
The following is a list of the top sectoral holdings of the ICICI Prudential Value Discovery Fund*:
|Investment Sector||Top Holdings|
|Banking/Financial Services||HDFC Bank Ltd, ICICI Bank, Bajaj Finserv, Axis Bank, Karur Vysya Bank, J & K Bank, Max Financial etc.|
|Engineering & Capital Goods||Larsen, Sadbhav Engineering, Bharat Heavy Electricals Limited, GMR Infrastructure, etc.|
|Pharmaceuticals||Sun Pharma, Cipla, Divis Laboratories, etc.|
|Information Technologies||Wipro, Infosys, HCL Technologies, MphasiS, Mindtree, Persistent, etc.|
|Utilities||NTPC, Power Grid Corporation, etc.|
|Automotive||Mahindra & Mahindra, Exide India, Amara Raja Battery, Tata Motors, Balkrishna Industries, etc.|
|Oil and Gas||Indian Oil Corporation, Petronet LNG, etc.|
|Services||Container Corporation, Gujarat Pipavav, GE Shipping, etc.|
|Manufacturing||Bharat Forge Limited, Bharat Electricals, etc.|
|Others||PI Industries, Blue Star, United Spirits, Hindalco, Gateway Distributors, etc.|
*The above list is illustrative and the investments mentioned therein are liable to periodic change as per fund objectives and market conditions.
How to Invest in ICICI Prudential Value Discovery Fund through Paisabazaar.com
Paisabazaar.com offers a free to use investment platform that any Indian investor can potentially use to invest in a variety of mutual funds as well as fixed deposits that can help investors make their investments grow. Among the many leading fund houses that Paisabazaar.com has tie-ups in India, ICICI Prudential Mutual Funds is one of the most popular ones. ICICI Prudential Value Discovery Fund is one of the many funds that the AMC has on offer through the platform. Signing up for the account is simple with eKYC as mandated by SEBI and all the prospector needs to do is set up a banking mandate using the image of a 'Cancelled' cheque and input of key account details such as account number, IFSC, MICR etc. The actual purchase can be completed through an ECS mandate in case of a SIP or a net banking transaction through your registered bank account. The units allocated will subsequently be reflected in you Paisabazaar.com portfolio as per the applicable NAV.