Sundaram Mutual Fund has launched Rural India Fund, an open-ended scheme which would seek to generate long-term returns by investing predominantly in equity / equity-related instruments of companies benefiting from rural India's transformation.

Rural India Fund, is India's first fund that will invest between70 per cent to 100 per cent of its assets in companies focusing on rural India. Up to 30 per cent of the assets can be invested in the stocks of other companies. It will also invest up to 15 per cent of its assets in money and related instruments.

The new fund offer (NFO) opened on March 20 and closes on April 19. The issue of units is at Rs10 each for cash and there is no entry load during the NFO.

Addressing the launch of Rural India Fund, Sunil Subramaniam, vice-president (retail distribution), Sundaram MF, said that the fund would invest in companies that generate at least 10 per cent incremental revenue from rural India. It has identified over 20 sectors which would benefit from the purchasing power of rural India.

He said that the public private partnership in transforming rural parts of India would involve huge investments and companies in infrastructure development, consumer goods, industrial equipment, textiles and pumps would be the immediate beneficiaries. The fund will invest in companies that supply equipment to enable rural growth.

The first investment strategy would be rural capex in which the government is expected to invest substantially in infrastructure improvement and a number of companies with a rural focus would benefit from this investment.

The second strategy would be rural consumption, wherein the fund will look at investing in companies benefiting out of rural consumption.

T P Raman, managing director, Sundaram MF, said that the government's Bharat Nirman Yojana for comprehensive rural upliftment and increasing corporate participation in rural areas are providing the much-needed impetus for the growth of rural India.

Sundaram Mutual, a wholly-owned subsidiary of Sundaram Finance, will pursue top-down approach for sectors and bottom-up approach on stock selection with no market cap restrictions for managing Rural India Fund, said Subramaniam.