- Nippon Life India Asset Management Limited and ICICI Prudential AMC announced the launch of India’s First Auto sector ETFs, respectively.
- These funds will open on January 5, 2022, and will be based on the Nifty auto index.
- The Nifty auto index has outperformed Nifty 50 in seven of the 11 preceding years.
Nippon Life India Asset Management’s NFO
Nippon’s NFO (New Fund Offer) will open on January 5, 2022, and close on January 14, 2022. The minimum investment required during the NFO is ₹1,000 and in multiples of ₹1 thereafter. It will predominantly invest in stocks comprising of the Nifty Auto Index in the same proportion as the Index. It will provide exposure to the top 15 companies(as per Nifty Auto Index methodology) representing sectors like 2-wheeler, 3-wheeler and 4-wheeler automobiles; auto ancillaries and tyres.
It is designed to reflect the behaviour and the performance of the automobiles sector and will be benchmarked against the NiftyAuto TRI. Its objective is to provide investment returns closely corresponding to the total returns of the securities as represented by the Nifty Auto Index before expenses, subject to tracking error. However, there can be no assurance or guarantee that the investment objective of the Scheme will be achieved.
ICICI Prudential Mutual Fund’s NFO
The new fund will open on January 5, 2022, and will close on January 10, 2022, the AMC said without offering how much it plans to collect during the NFO phase despite claiming that it is an industry-first.
The open-ended ETF will track the Nifty auto index and will also more or less reflect the behaviour and performance of the automobile segment. The new scheme aims to provide exposure to blue-chip auto and auto ancillary stocks that are part of the benchmark indices.
The AMC said it sees the sector as under the spotlight given the government support to electric mobility and large opportunities. The new fund will help investors tap the domestic automobile industry, which is the third-largest in the world.
“Nippon India Mutual Fund has been at the forefront of a very fast-growing industry, establishing one of the most robust and differentiated ETF platforms in India. Nippon India Nifty Auto ETF is yet another addition to our ETF offerings, helping investors to participate in India’s Auto sector growth story through investing in a basket of 15 stocks representing the Nifty Auto Index. Nippon India Nifty Auto ETF which is the first Auto sector ETF to be launched in India, will provide a simple and low-cost (in terms of total expense ratio) portfolio building block to participate in the auto sector, ” said Hemen Bhatia, Head ETF, Nippon India Mutual Fund.
Some factors that augur well for the sector is the growing average household income leading to higher purchasing power, availability of skilled labour at relatively lower cost, presence of robust R&D centres aiding the sector growth, and supportive government policies to boost electric mobility.
The Nifty auto index is designed to reflect the behaviour and performance of the automobiles segment and the universe for the offering is Nifty 500. No single stock shall be more than 33 per cent and weights of top-three stocks cumulatively shall not be more than 62 per cent at the time of rebalancing which is done semi-annually in March and September, respectively.
The Nifty auto index has outperformed Nifty 50 in seven of the 11 preceding years.
