HDFC EQUITY OPPORTUNITIES FUND

(SERIES 2)
AN EQUITY INVESTMENT WITH PORTFOLIO HEDGE#

HDFC EOF - II - 1126D May 2017 (1)

(A Close Ended Equity Scheme)

Riskometer
This product is suitable for investors who are seeking*:

Capital appreciation over 1126 days (tenure of the Plan)

Investment predominantly in equity and equity related instruments
across market capitalization.
*Investors should consult their financial advisers if in doubt about
whether the product is suitable for them.
 CAN SOMETHING GO WRONG?

Historically, there have been incidences when markets have fallen around 20% in a span of 1-2 years even reaching
up to a fall of 60% in 2008 due to various reasons on the global front like dotcom bubble crash, unregulated
financial institutions. Some examples are given below.
However, every time market has crashed, it has emerged out of the cycle by ending at a higher level that all the
previous closes.
For markets to turn around, earnings need to grow as expected. If by any chance, the earnings do not rebound,
markets would punish investors with a significant correction.
In the backdrop of the recession in the global markets,
The fall of 2008! Markets fell almost -60% from Jan-
Indian markets too saw a fall of around -22.66% from
Oct 2008 from Nifty level of 6287 to 2524 levels
Mar-Oct 2002 with nifty level of 1193 to 922 levels

Source: Bloomberg
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 BUT PROBABILITY IS LOW. SO DONT MISS THE OPPORTUNITY

The probability of such a fall is very low.

The economy strongly supports the rebound of earnings which in turn may result in a rally in the markets.
Typically, investors avoid participating in the markets due to fear of a big loss and miss the opportunities available.
Alternatively, one can invest in the market with a downside protection and benefit from the cycle turnaround.
In case of a false start by the markets and no turnaround in the earnings, the put option will protect the portfolio
from the downside.

STRATEGY TO MAXIMISE UPSIDE & LIMIT DOWNSIDE

STRATEGY

LIMIT DOWNSIDE MAXIMISE UPSIDE

Protect the downside by investing in a put Equity exposure to a one of the best
option investment managers in the country
Low cost around1.75%-2% per annum for Invest in theme that is expected to
buying the option capitalize on the exponential acceleration
in the economy of India

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 INVESTMENT STRATEGY OF SCHEME

A FOCUSED PORTFOLIO

Combined with a strategy to limit downside by purchasing at-the-money (ATM) ~3 year long dated NIFTY 50 Put Options with a strike
around current levels

Investment Theme

Bottoming out of NPA cycle

Corporate Banks Process of NPA resolution
Passage of Bankruptcy code, sale of corporate assets

Govt focus on Roads, Railways, Defence, Renewable energy and Affordable Housing
Recovery in Capex Power transmission & Distribution
cycle Cyclical recovery in Metals

Unorganized to Implementation of GST and growth in digitization

Organized Streamlining of Corporate tax and compliance cost for unorganized sector

For complete details of Investment Strategy refer SID/KIM

3 Disclaimer : HDFC Mutual Fund/AMC is not guaranteeing returns on investments made in the Scheme and/or should not be construed as an advice for investing in
the above sectors; Benchmark of the scheme is NIFTY 500
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 PUT OPTION ILLUSTRATION

Illustration based on the following assumptions:

Invested Amount = Rs.100, Cost of Put = 6% of hedged amount, Allocation to Stocks Portfolio = 94.34%
NIFTY 50* Level = 9200
Fund Return Fund Return Fund Return
NIFTY 50* Level at NIFTY 50*
(with 0% (with 10% (with 20%
Maturity Returns
Outperformance) Outperformance) Outperformance)
6000 -34.78% -5.66% 3.77% 13.21% Downside protection
7000 -23.91% -5.66% 3.77% 13.21% as put payoff offsets
8000 -13.04% -5.66% 3.77% 13.21% loss in the portfolio
9000 -2.17% -5.66% 3.77% 13.21%
10000 8.70% 2.54% 11.98% 21.41%
11000 19.57% 12.80% 22.23% 31.67% Uncapped Upside.
12000 30.43% 23.05% 32.49% 41.92% Cost of hedging
13000 41.30% 33.31% 42.74% 52.17% downside limited to
14000 52.17% 43.56% 52.99% 62.43% 6%
15000 63.04% 53.81% 63.25% 72.68%
16000 73.91% 64.07% 73.50% 82.94%
The above illustrates the payoff in multiple scenarios of index levels at maturity. For e.g., if the index falls to 7000 after 3 years (i.e. a 23.91% fall), the scheme
falls only by 5.66% assuming 0% outperformance. However, given an outperformance of 10% over the 3 year period, the scheme returns 3.77%. (see row
corresponding to NIFTY 50 level at 7000). The scheme thereby provides downside protection.
However, in scenarios with higher index levels, the scheme delivers commensurate returns with no upside cap.
The above simulation does not in any manner offer any assured returns and is subject to market risks. The above simulation does not take expenses into account and that the returns shown are assumed figures and not to be constructed as
actual returns and/or guaranteed returns. HDFC Mutual Fund/AMC is not guaranteeing returns on investments made in the Scheme. The information provided herein is used to explain the concept and is given for illustrative purposes only.
The same is not sufficient and shouldnt be used for the development or implementation of an investment strategy. It should not be construed as an investment advice to any party. Past performance may or may not be sustained in future. In
view of the individual circumstances and risk profile, each investor is advised to consult his / her professional advisor before making a decision to invest in the scheme.
*NIFTY 50 has been used for illustration purpose. Benchmark of the fund is NIFTY 500. Outperformance in this illustration refers to excess returns over the NIFTY 50 index.

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 FUND SUITABILITY & RISK FACTORS

This fund is suitable for investors looking to:

Participate in the Indian Equity market over the next 3 years

Limit downside in returns over the period due to fall in the market

Achieve overall capital appreciation by reducing downside risk

RISK FACTORS:

The strategy may or may not provide returns in excess of the benchmark. Downside protection is based on the movement
of the index, not the schemes stock portfolio. In the event of underperformance to the benchmark, the scheme can erode
further capital to the extent of the underperformance.

The risk/downside, if the index remains above the strike is only limited to the option premium paid. There is positive
return from the put allocation only if the index falls below the strike price.

The put option strategy will have as much loss / gain as the reverse of the underlying index. For e.g., if the index
depreciates by 10%, the underlying exposure from the put rises by 10%. However, this is only true for options held till
maturity.

While options markets are typically less liquid than the underlying cash market, there can be no assurance that ready
liquidity would exist at all points in time, for the Scheme to purchase or close out a specific contract.

For complete details of Investment Strategy refer SID/KIM

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 FUND FACTS

Scheme Name HDFC Equity Opportunities Fund (Series 2)

SCHEME TYPE Closed Ended Equity Scheme
INVESTMENT MANAGER HDFC Asset Management Company Limited
PRODUCT LABELLING Moderately High Risk (Refer slide 1 of the presentation)
TENURE 1126 days
MATURITY DATE 1126 days from Date of allotment
NFO PERIOD 26th May 2017 to 1st June 2017
FUND MANAGER Mr. Srinivas Rao Ravuri
To achieve long term capital appreciation by investing predominantly in equity and equity-related
INVESTMENT OBJECTIVE instruments across market capitalization and sectors that will benefit from growth of the Indian economy.
There is no assurance that the investment objective of the Scheme will be realized.
The scheme is a diversified equity fund. The fund will look for opportunities across the India economy and
within that various sectors. It will predominantly invest in 5 to 6 sectors. The scheme will invest across
market capitalization and across sectors while emphasizing on absolute and relative value. The fund
INVESTMENT STRATEGY
manager will also look at opportunities in the equity derivative segment and can invest up to 20% of the
net assets of the scheme if a suitable opportunity is spotted. Furthermore the scheme when deemed
appropriate may invest up to 20% in index options.
Not applicable. The Units under the Plan cannot be directly redeemed with the Fund until the Maturity
EXIT LOAD
date/ Final Redemption date.
BENCHMARK NIFTY 500

For complete details refer SID/KIM available on the website www.hdfcfund.com or with Distributor
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 ASSET ALLOCATION PATTERN

Under normal circumstances, the asset allocation of the schemes portfolio will be as follows:
NORMAL ALLOCATION RISK PROFILE OF THE
TYPE OF INSTRUMENTS
(% OF NET ASSETS) INSTRUMENT

EQUITY AND EQUITY RELATED INSTRUMENTS

80-100 High
INCLUDING DERIVATIVES

DEBT & MONEY MARKET INSTRUMENTS* 0-20 Low to Medium

*Investment in Securitised debt, if undertaken, would not exceed 20% of the net assets of the Scheme.

The maximum equity derivative position will be restricted to 50% of the equity component of the Plan under the Scheme. The entire equity derivative exposure of the Plan (either in
futures/options) shall not be in a single scrip/stock only. The total exposure related to option premium paid shall not exceed 20% of the net assets of the Plan.

For complete details refer SID/KIM available on the website www.hdfcfund.com or with Distributor

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 DISCLAIMER

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.

IIFL Wealth Management Limited AMFI Registration Number: 59563

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Source: Various media publications

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 THANK YOU.

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