ICICI Prudential Mutual Fund on Wednesday launched the new fund offer (NFO ) for ICICI Prudential Nifty Commodities ETF, an open-ended ETF replicating the Nifty Commodities Index.
The index has a diversified portfolio of companies dealing in oil, petroleum, cement, power, chemicals, sugar, metals, and mining. The index has grown 11.93 per cent annually since November 2012.
For instance, suppose you had invested Rs 1 lakh in the index in 2012, it would have become Rs 3.08 lakh in November 2022. The NFO for Nifty Commodities ETF will run from December 14 to 15, 2022.
Unveiling the plan, the ICICI Prudential AMC, in a press release, said, “The Index is designed to reflect the performance of a diversified portfolio of companies in the commodities segment.”
The fund, it said, will seek to capitalise on India’s “tremendous progress” in the commodities market, driven by technology and trading activity.
Chintan Haria, head of product development & strategy at ICICI Prudential AMC, explains, “The commodity market has always been one of the most attractive investment asset classes. The demand for commodity inputs generally remains high as they fuel the country’s economic growth.”
Why Invest In Commodities ETF?
Demand in the commodities market looks positive, with strong pipeline deals and increased domestic capacities. In addition, commodity prices positively correlate with inflation leading to higher profits during inflationary periods, the fund house noted.
Moreover, commodities are not highly correlated with each other, helping absorb the market shocks. Companies in the commodities sector also pay high dividends.
ICICI Prudential AMC noted that “unprecedented expenditure on infrastructure augurs well for domestic commodity manufacturers.”
Constituents & Growth Prospects
The ICICI Prudential Nifty Commodities ETF will select stocks based on the Nifty 500 Index. It will rebalance the portfolio constituents semi-annually on January 31 and July 31. Some of the top sectors will be power, chemicals, construction materials, metals, mining, etc.
The Nifty 50 TRI’s compound annual growth rate (CAGR) was 11.93 per cent over the past one year, whereas the Nifty Commodities TRI grew at a CAGR of 15.13 per cent. Likewise, in three years, it was 17.23 per cent for Nifty 50 TRI and 23.31 per cent for Nifty Commodities TRI.
