Nippon India Mutual Fund's two new index funds, the Nippon India Nifty IT Index Fund and the Nippon India Nifty Bank Index Fund, are open for New Fund Offers (NFOs) subscription till tomorrow February 16, 2024. These passively managed funds, one based on the Nifty IT Index and another on the Nifty Bank Index will mirror the respective indices. During the NFO the minimum application amount is Rs.1,000 and in multiples of Re.1 thereafter. No exit load is applicable.
Index Funds
Both index funds are passively managed, tracking the performance of their respective indices. This style provides investors with exposure to an entire basket of stocks, rather than selecting individual companies. The transparency in-stock selection and lower cost when compared to active funds are benefits of choosing an index fund. Both the funds will allocate 90 to 95 per cent of their portfolio in stocks constituting the tracking index.
Nippon India IT Index Fund
The Nippon India IT Index Fund seeks to leverage the recent resurgence in the technology sector, by investing in the top 10 Indian IT companies. The Nifty IT Index has given an annualised return of around 27 per cent in the last year, outperforming the Nifty 50 index almost half the time.
Of the total global spend on IT services, 40 per cent is outsourced out of which India procures 58 per cent. A total of 40 per cent of revenues of Indian IT companies come from digital technologies, where they have the first mover advantage, the fund house said.
Nippon India Nifty Bank Index Fund
The Nippon India Nifty Bank Index Fund mirrors the performance of the Nifty Bank Index, providing investors with exposure to the top 12 banks in India. The banking sector is in a boom phase, with net profits growing by 44.6 per cent in FY23. Further, credit growth has remained healthy, exceeding 15 per cent in last year. The rise in per capita incomes and increase in digital payments adoption is expected to further fuel the growth of banks in India.
The Nifty Bank Index has returned 13.3 per cent and 16.4 per cent in the last one and three years, respectively.
