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Indiabulls Value Discovery Fund

Type of Scheme: An Open-ended Equity Scheme

Investment Objective: The primary objective of the Scheme is to seek to generate capital appreciation by investing in a portfolio of Equity and Equity related securities of companies that meet the relative value criteria and fall within top 500 by market cap. A company is considered as showing high relative value if it has a combination of higher RoCE and higher earnings yield. However, there is no assurance that the investment objective of the Scheme will be realized and the Scheme does not assure or guarantee any returns.
This product is suitable for investors who are seeking*
An Open-ended Diversified Equity Scheme
Investment primarily in companies that offer high relative value vis –a vis other companies and fall within top 500 by market capitalization
Moderately High Risk
RISKOMETER
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Investors understand that their principal will be at moderately high risk

*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

Asset Allocation

Instruments Indicative allocation (% of total assets) Risk Profile
  Minimum Maximum Low/ Med/High
Equity and equity related instruments 65% 100% High
Debt & Money market instruments, Cash and Equivalent 0% 35% Low

 

Equity Investments - The Scheme aims to provide long term capital growth by investing in a well-diversified portfolio of equity and equity related securities. The Scheme will endeavour to invest in companies that offer high relative value vis –a vis other companies and fall within top 500 by market capitalization. The Scheme will invest across market capitalization and without any sector bias.

A company is considered as showing high relative value if it has a combination of higher Return on Capital Employed (RoCE) and higher Earnings Yield. Top 500 stocks by market capitalization would be ranked individually on both these criterion separately. Both these criterion would be assigned certain weights based on the prevailing market conditions and valuations. These individual ranks would then be multiplied with respective weights and added to arrive at a final rank score for each stock. These stocks would then be screened on the basis of strength & quality of the business & balance sheet using Piotroski score, apart from certain other criteria like corporate governance standards and liquidity, to arrive at a final list of eligible securities. Stock with highest rank scores would then be included in the portfolio. Maximum number of stocks in the portfolio would not exceed 40.

Portfolio would ideally be reviewed on a quarterly basis or on happening of certain events like poor corporate governance practice by a company, liquidity profile changing or valuations getting stretched for individual stock or for market as a whole.

Following is the illustration of methodology to be followed for stock selection:

The stock selection process begins with the calculation of ‘Return on Capital’ and ‘Earning yield’ for Top 500 companies by market capitalization. These companies are then ranked based on higher ‘Return on Capital’, and higher ‘Earnings Yield’ as demonstrated below,

Based on these calculations, the company shall be ranked for 'Return on Capital’ and ‘Earning Yield’ within the Top 500 companies. Both the individual ranks are then assigned weightages based on market conditions as specified under column ‘Ratio’. The weighted rank score is then computed and Top 500 companies are then organized as per their individual score to arrive at the final rank. The Piotroski score for each company is then assigned and considered while shortlisting the scrip. Understanding Piotroski Score: It is a discrete score between 0-9 which reflects nine criteria used to determine the strength of a firm's financial position. The Piotroski score is used to determine the best value stocks, nine being the best. The score was named after Chicago Accounting Professor, Joseph Piotroski who devised the scale according to specific criteria found in the financial statements. For every criteria (below) that is met the company is given one point, if it is not met, then no points are awarded. The points are then added up to determine the best value stocks.

Profitablity
Positive return on assets in the current year (1 point).
Positive operating cash flow in the current year (1 point).
Higher return on assets (ROA) in the current period compared to the ROA in the previous year (1 point).
Cash flow from operations are greater than ROA (1 point) .

Leverage, Liquidity and Source of Funds
Lower ratio of long term debt to in the current period compared value in the previous year (1 point).
Higher current ratio this year compared to the previous year (1 point).
No new shares were issued in the last year (1 point).

Operating Efficiency
A higher gross margin compared to the previous year (1 point).
A higher asset turnover ratio compared to the previous year (1 point).

Debt Investments - The Scheme will retain the flexibility to invest in the entire range of debt instruments and money market instruments. Investment in Debt securities and Money Market Instruments will be as per the limits in the asset allocation table of the Scheme, subject to permissible limits laid under SEBI (MF) Regulations. The actual percentage of investment in various fixed income securities will be decided after considering the prevailing political conditions, the economic environment (including interest rates and inflation), the performance of the corporate sector and general liquidity and other considerations in the economy and markets. The investment management team is allowed full discretion to make sale and purchase decisions within the limits established.

 

  • Type of Scheme :
    An Open-ended Diversified Equity Scheme
  • Options :
    Growth Option & Dividend Option.
    The Dividend option has the following
    facilities: Dividend Re-investment
    Facility & Dividend Pay-out Facility
  • Minimum application amount :
    Rs. 500 and in multiples of Re. 1 thereafter
    Rs. 500 and in multiples of
    Re. 1 thereafter (For Systematic Investment Plan )
  • Minimum additional purchase amount :
    Rs. 500 and in multiples of Re. 1 thereafter.
  • Minimum redemption amount :
    Minimum of Rs. 500 or account balance,
    whichever is lower and in multiples
    of Re. 1 thereafter.
  • Load Structure :
    Entry : Not Applicable
    Exit : 1% if redeemed/switched out within
    first year, NIL if redeemed/switched
    out after one year.
  • Benchmark :
    S&P BSE 500 INDEX

 

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Mr. Malay Shah (Head – Fixed Income)

malay.s@indiabulls.com

He has around 12 years of experience in the field of finance. He has exposure to Debt – Dealing and Fund Management. Prior to joining Indiabulls Asset Management Company Limited, he was working in the capacity of Head – Fixed Income with Peerless Funds Management Co. Ltd, managing all the debt schemes namely Liquid, Ultra Short Term, Short Term, Income Plan, Child Plan, Dynamic Bond and FMPs.

 

 

Mr. Sumit Bhatnagar (Head–Equity Funds)

sumit.bhatnagar@indiabulls.com

Mr. Sumit Bhatnagar has over 14 years of experience in Banking & Capital Markets. At Indiabulls Mutual Fund, Sumit played a pivotal role in setting up the AMC systems & processes and in framing business strategy, designing business plan and products for the AMC he is an MBA (Finance) from University of Toronto & a CFA.