ICICI Prudential Mutual Fund has announced the launch of ICICI Prudential Nifty50 Value 20 Index Fund. The offering aims to provide returns that closely correspond to the returns of its benchmark Nifty50 Value 20 Index, subject to tracking error. The New Fund Offer (NFO) is available for subscription till January 29, 2024.
The 20 constituents in the portfolio will be from the Nifty 50 Index, ICICI Prudential Mutual Fund said.
Decoding value stocks
The
value stocks in the underlying index are shortlisted based on parameters like Return on Capital Employed (ROCE), Price Earnings Ratio(PE), Price to Book Value Ratio(PB) and Dividend Yield (DY).
The final ranking is derived to select the value stocks from Nifty50.
The weights of 0.4, 0.3, 0.2 and 0.1 are assigned to ranks of ROCE, PE, PB and Dividend Yield respectively to derive the final ranking for selection.
The top 20 companies as per the ascending order of the final ranking are selected to form the index, ICICI Prudential Mutual Fund said.
Index portfolio
(Data Source: NSE. Data as of December 31, 2023)
NFO details
The objective of ICICI Prudential Nifty50 Value 20 Index Fund is to invest in companies whose securities are included in Nifty50 Value 20 Index in the same weightage that they represent in Nifty50 Value 20 Index to achieve the returns of the above index, subject to tracking errors.
However, there is no assurance or guarantee that the investment objective of the scheme shall be achieved, the fund house said.
The minimum subscription amount allowed is ₹100.
There are no entry and exit loads attached to the scheme.
A look at returns of peer funds
| Fund Name | 1-year return |
|---|
| Nippon India Nifty 50 Value 20 Index Fund - Direct Plan | 31.09% |
| ICICI Prudential Value Discovery Fund - Direct Plan | 35.37% |
| SBI Contra Fund - Direct Plan | 42.79% |
| Bandhan Sterling Value Fund - Direct Plan | 36.84% |
| Templeton India Value Fund - Direct Plan | 37.94% |
(Source: Value Research)
Investment considerations
The fund is strategically designed to provide investors with exposure to value-oriented companies forming part of the Nifty 50 Index. This approach aligns with the belief that value investing tends to perform well, particularly in elevated market conditions.
Investors have the opportunity to gain factor-based exposure to the large-cap equity segment, allowing for a diversified investment approach. By tracking the top 20 most value-oriented blue-chip companies, the ICICI Prudential Nifty50 Value 20 Index Fund aims to outperform broader market indices over the long term, the fund house said.
According to Chintan Haria, Principal- Investment Strategy at ICICI Prudential AMC, the value strategy aims to deliver diversification and downside resilience, and has the potential to outperform broader market indices over a full market cycle.
"The individual constituent weight in the index is capped at 15%, and the same is reviewed and rebalanced annually in December. This ensures a dynamic approach to maintaining a well-structured and relevant portfolio," he said.
Historical data reveals that the Nifty 50 Value 20 Index has consistently outperformed the Nifty 50 Index over 1-year, 3-year, and 5-year periods.
(Source: ICICI Prudential Mutual Fund)
Additionally, it has demonstrated lower volatility and better downside risk limitation compared to the broader market index.
However, investors are encouraged to carefully evaluate their financial goals and risk tolerance before considering this investment opportunity.
