SBI Mutual Fund, India’s largest fund house with assets under management (AUM) of over ₹8.50 lakh crore as of December 2023, on Tuesday, January 16, launched a NIFTY50 Equal Weight Index Fund. This new fund offer (NFO) is an open-ended scheme replicating/tracking the NIFTY50 Equal Weight Index, effectively with relatively lower costs as it is a passive offering, SBI Mutual Fund said in a statement.
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The NFO will be available for subscription till January 29, 2024.
Investment objective
The investment objective of the scheme is to provide returns that correspond to the total returns of the securities as represented by the underlying index, subject to tracking errors. However, there is no guarantee or assurance that the investment objective of the scheme would be achieved, the fund house said.
Load structure
The fund imposes a 0.25% exit load for those who decide to exit on or before 15 days from the date of allotment.
However, after the initial 15-day period, no exit load is applicable.
Additionally, it's worth mentioning that the asset management company (AMC) reserves the right to modify or change the load structure on a prospective basis.
Asset allocation
The scheme would primarily invest a minimum of 95% and a maximum of 100% of its assets in stocks comprising the NIFTY50 Equal Weight Index, up to 5% in equity derivatives or up to 5% in government securities (like G-Secs, SDLs, treasury bills and any other like instruments as specified by the RBI from time to time), including triparty repo and units of liquid mutual fund.
| Instruments | Indicative Allocations (% of total assets) | Risk Profile |
|---|---|---|
| Securities covered by the Nifty50 Equal Weight Index | 95 - 100 | Medium to High |
| Government Securities* including Triparty Repo, and units of liquid mutual fund | 0 - 5 | Low to Medium |
(Source: Fund document)
Investment amount
The minimum application amount required is ₹5,000 and in multiples of ₹1 thereafter.
Investments can also be done through daily, weekly, monthly, quarterly, semi-annual, and annual SIP (Systematic Investment Plan).
Fund manager
The fund manager for the SBI NIFTY50 Equal Weight Index Fund is Viral Chhadva, who has been associated with the fund house since December 2020.
A look at returns of similar funds
| Fund Name | 1-year return (%) |
|---|---|
| HDFC NIFTY50 Equal Weight Index Fund - Direct Plan | 32.29% |
| DSP Nifty 50 Equal Weight Index Fund - Direct Plan | 32.30% |
| UTI Nifty 50 Index Fund - Direct Plan | 23.95% |
| HDFC Index Fund Nifty 50 Plan - Direct Plan | 23.94% |
| ICICI Prudential Nifty 50 Index Fund - Direct Plan | 23.91% |
(Source: Value Research)
Investment considerations
According to Shamsher Singh, MD & CEO of SBI Funds Management, the SBI NIFTY50 Equal Weight Index Fund employs a smart-beta strategy, allocating equal weight to all stocks rather than considering market capitalisation as the sole criterion.
This approach aims to provide investors with balanced diversification and broad-based growth potential across all companies in the NIFTY50 index.
D P Singh, Deputy MD & Joint CEO, SBI Funds Management, highlighted the importance of the SBI NIFTY50 Equal Weight Index Fund in addressing the challenges associated with market-cap-weighted indices like NIFTY50.
He explained, "In market-cap weighted indices, a stock or sector might constitute a large portion of the index, sometimes leading the index to be driven by them. This fund provides an opportunity for investors to benefit from the merits of passive investing while aiming for diversification and growth across the largest companies in India."
However, as with any investment, potential subscribers should carefully assess their financial goals, risk tolerance, and investment horizon before making decisions.
(Edited by : Amrita)
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