HDFC Business Cycle Fund: Should you ride this cycle?

HDFC Mutual Fund has come up with a New Fund Offer (NFO)—HDFC Business Cycle Fund, an open-ended thematic fund. The fund endeavours to capitalize on upswings in business cycles and focus on reasonably valued companies presenting high earning potential.

A snapshot of HDFC Business Cycle Fund

NFO period: November 11, 2022 — November 25, 2022.

Type of scheme: Thematic

Theme focus: Cyclical companies having growth tailwinds

Portfolio management style: Dynamic (i.e. depending on market conditions, the fund may frequently churn its holdings)

Benchmark: Nifty 500 Total Return Index (TRI)

Indicative asset allocation to the core theme: Minimum 80%

Exit loads: 1% on switch-out/redemption within a year; nil thereafter

Minimum investment amount: Rs 100

Specific market cap bias: No bias. Will invest across large, mid and small caps

Fund Suitability: Aggressive investors having high risk appetite

Fund Manager: Rahul Baijal (total experience, 20 years)

To invest in HDFC Business Cycle Fund NFO you can simply log in to your Ventura account or you can write to us at mfcustomercare@ventura1.com for any further assistance.

Don’t have a demat account with Ventura yet? Click here to open one and start investing.

Haven’t decided whether or not to invest in HDFC Business Cycle Fund NFO yet? Here’s a market snapshot for your reference.

Let’s address the most basic question, are green shoots visible?

Capacity utilisation of Indian manufacturing companies has surged significantly from the pandemic lows. It’s an important indicator to gauge how robust the fresh capex cycle could be.

Capacity utilisation levels of manufacturing companies

Banks are said to be the pancreas of an economy. The health of the banking sector and pace of its activities can be a strong indicator of the overall economic health of a country. Similarly, capex plans of cement companies, order book positions of infra and construction companies can have crucial hints as well.

What does the situation at the grassroots look like?

• Credit growth of India’s banking sector touched a 9-year high in Q2FY22.
• Banks have been reporting improvements on key business parameters
• SBI’s corporate loan book pipeline, including proposals under consideration, has been worth Rs 3.75 lakh crore
• SBI is hoping to clock a 14-16% growth in FY23 as against 11-12% envisaged earlier.
• India’s largest company by market cap, Reliance, is expected to invest Rs 3.5 lakh crore across its three businesses—telecom, Oil-to-Chemical (O2C) and new energy, over the next few years.
• Adani group is not far behind and aims to invest USD 100 billion over the next one decade to grow its businesses across verticals—new energy, digital, infrastructure and defence, amongst others.
• L&T has an outstanding order book of Rs 3.72 lakh crore, of which 72% are domestic orders. The company has also reported a healthy pick up in hydrocarbon and infra sector orders in H1FY23.
• India’s largest cement manufacturer, Ultratech, is expected to spend Rs 12,900 crore to add 22.6 MMTPA of capacity by FY25. Similarly, other cement companies such as JSW Cement have also chalked out ambitious plans.

If you add to the above the list of government capex, including that of Indian Railways and PSU capex, India’s growth story appears more promising.

Connecting the dots…

All important indicators hint at a business upcycle. They include:

• High capacity utilization levels
• Impressive response to PLI schemes
• Attractive import substitution opportunities
• Huge capex pipeline of leading Indian companies
• Positive trends in bank credits and bullish management commentaries thereon

While these factors present an overall optimistic picture for the scheme’s performance. The million dollar question now, is how much of this will translate into bottom line growth for India Inc? The success of any business cycle fund will entirely depend on this.

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