Rural riches

NEW FUND OFFERINGS

Sundaram Rural India Fund presents an opportunity to profit from the rural wealth.

Rural India is no longer the slow-paced, lost-in-the-past land you thought it was. It is changing at a pace which is hard to believe. The government's renewed focus on rural development has turned rural areas into the country's growth propeller.

Continuing efforts like Bharat Nirman Yojna, a government initiative with an outlay of Rs 1.74 lakh crore, and increasing corporate participation to address the needs of this segment should provide the much needed impetus for growth, even going forward.

Now, this growth in rural India throws a plenty of opportunities for wide-ranging business establishments to benefit from. And understanding that, Sundaram Mutual has launched the country's first fund focusing on rural India "� Sundaram Rural India Fund.

The open-ended fund seeks to leverage growth opportunities likely to be thrown up as rural India undergoes a transformation. By focusing on companies with a rural focus, the fund will garner all the advantages of 'being an early bird' in what is likely to be a long-term growth area.

Some of the sectors that are expected to constitute the fund's portfolio are irrigation, power, cement, sugar, paints, tea, and fertilisers.

Significant exclusions from the fund would be sectors such as technology, chemicals, oil & gas, refineries, steel and aluminium, since these do not directly contribute to the growth of the rural sector. The fund will invest 70-100 per cent of its assets in companies focusing on rural india, 30 per cent can be invested in stocks of other companies and upto 15 per cent in money market and related instruments.

Distinguishing this fund from other diversified equity funds, N Prasad, chief investment officer, Sundaram Mutual, said, "Unlike any other diversified equity fund, only 32 per cent of the current market capitalisation will be the universe for this fund." Of the 540 common stocks that make up the universe of diversified fund portfolios, only 1/3rddirectly contribute to the growth of rural India.

The downside in a fund like this is that rural income in India is still largely dependent on agriculture income, which is vulnerable to the vagaries of nature. A bad monsoon can slow down rural demand as it negatively affects farm income. So, when the nature is unfavourable, the fund managers may be able to add little value.

The theme of the fund sounds good in today's circumstances, so you may look forward to gain by investing in this pro-poor fund. But be sure, you need to review your portfolio as the situation changes.