Natrajan, CEO, IIFL Mutual Fund talks about the IIFL CNX Dividend Opportunities
Index Fund and why this fund could be a good bet for investors looking to cash
in on companies with high cash flows.
Why did you choose to
launch a fund which tracks the CNX Dividend Opportunities Index? What will be
the fund’s strategy?
It’s a passively managed scheme and the objective is to
replicate the CNX Dividend Opportunities Index. We liked this theme of dividend
yield index which has shown stable performance in all kinds of markets. If one
looks at the history of the last 5 years and particularly from October 2007 (index
base date), the market has seen all kind of phases - like October 2007 to January
2008 which was a sharp run of midcap, sharp fall in 2008, sharp bounce back and
rally from May 2009 and gradual decline of 2011. In all these kind of phases,
performance of the index was quite stable and it generally outperformed some of
the broad based indices like S&P CNX Nifty, CNX 100 and CNX Midcap.
What is unique about
this index fund?
It is based on the theme of high dividend yield companies
which typically have high cash flows and tend to perform well in the longer
run. It’s a passively managed scheme which tracks and replicates the CNX
Dividend Opportunities Index. The
index has a diversified blend of large caps, large mid caps and mid cap stocks
across 25 sectors.
Given the current
state of the market, what is your strategy to make the NFO of this fund a
We are looking at retail as well as HNI investors. Large
retail participation should help us to make this NFO a success.
What are your comments
on the domestic and global economic situation?
The present situation is challenging on both the domestic
and global front. The domestic headwinds of high current account deficit,
largely because of high crude prices and policy paralysis, along with global
uncertainty, mainly driven by the euro nations, will continue to have an impact
on the Indian markets from a short to medium term perspective. But any large
correction should be used as an opportunity to buy as our markets offer rich
value from a long term perspective.
What would be your
advice to investors?
We advise investors to adopt a long-term approach to
investments, after having an appropriate asset allocation strategy in place.
Systematic investment plans are a good strategy especially in volatile markets.