Edelweiss Mutual Fund – Nifty Quality 30 ETF NFO – Should you invest?
Edelweiss AMC has launched Nifty Quality 30 ETF NFO couple of days back. This Exchange Traded Fund (ETF) invests in 30 quality stocks in Nifty based on certain parameters. Investors have been shying away from ETF’s as they provide good returns only when markets move upwards. In the last few years, stock markets have become range bound, hence ETF’s are offering low returns. Should you invest in Edelweiss Mutual Fund Nifty Quality 30 ETF NFO? How ETF’s work exactly?
What are Exchange Traded Funds (ETF)?
Exchange traded funds are mutual fund schemes which are traded on stock exchanges, like stocks. An ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day. Most ETFs track an index, such as a stock index or bond index. E.g. a ETF can track BSE SENSEX which has 30 stocks. If SENSEX moves up, the NAV value of the ETF would move up. If SENSEX falls, NAV of ETF would fall.
Explained with an example.If you invest Rs 100,000 in an ETF which tracks BSE SENSEX for Rs100,000.Assume that SENSEX is at 24,000 points. Now SENSEX moves to 26,400 points (10% up from original). Your investment of Rs 100,000 also increase by 10% and would be Rs 110,000.
Features of Edelweiss Nifty Quality 30 ETF NFO
- This is open ended scheme.
- Scheme opened for subscription on 12-May-2016
- Scheme closes for subscription on 20-May-2016. It would reopen for further subscription from 1st June, 2016 after closure of the date.
- The index consists of 30 stocks selected on the basis of a quality score by India Index Services & Products Limited (IISL).
- Since this is ETF and not tax saving mutual fund, no tax benefits available.
- No entry or exit load applicable.
- This scheme is available for lump sum and SIP options.
What is the strategy of Edelweiss Mutual Fund Nifty Quality 30 ETF NFO?
The investment strategy adopted aims to cover companies, which have a financially strong track record, as evidenced through historical financial indicators such as return on equity, debt to equity, and average year-on-year growth in terms of profit after tax (PAT), over the past three years. It is a suitable fit for investors seeking an opportunity to generate long-term appreciation by investing in India’s best performing companies.
How does NIFTY 50 performing compared to Nifty Quality 30 Index?
What does Edelweiss Nifty Quality 30 Index ETF consists of?
Nifty Quality 30 Index invests in 30 stocks spread across 9 broad sectors. Liquidity is inbuilt as stock selection criteria filters out non-liquid stocks. Index maintained by IISL, an NSE group company. Below are the lists of stocks that are part of Nifty Quality 30 Index.
What does Edelweiss Mutual Fund Company say about this scheme?
During the launch of Edelweiss ETF – Nifty Quality 30, Mr. Vikaas M Sachdeva, CEO, Edelweiss Asset Management Ltd. said, “Keeping in mind investors’ interest, Edelweiss ETF – Nifty Quality 30 is the first opportunity to tap in to far better returns, but at lower costs as can be seen from the positive returns that this index has given since inception.”
“The Nifty Quality 30 index has delivered stellar performance in bull and bear phases compared to Nifty 50 and the CRISIL AMFI Large Cap Fund Index. The ETF will provide a great opportunity for investors to make money in the long-run”, added Mr. ManasShukla, Segment Head – ETF, Edelweiss Asset Management Ltd.
Should you invest in Edelweiss Mutual Fund Nifty Quality 30 ETF NFO?
This is the only ETF which tracks Nifty Quality 30 Index. As per prospectus it indicates that it invests in companies which have durable business model resulted in sustained growth. This ETF tracks index which has 30 companies which are selected based on low gearing, high return on equity and profit in past 3 years. Generally, I would not advice investing in SENSEX/NIFTY ETF, as they would not provide good returns in volatile markets. However, I felt this is unique Index. If you observe, NIFTY50 in FY2015-16, it generated 5 year annualized return of 7%, however NSE Quality 30 Index generated 13%. This Quality index has been performing better compared to NIFTY50. Instead of investing in NIFTY ETF or SENSEX ETF, one can invest in this quality 30 index ETF which can provide better returns.
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Edelweiss Mutual Fund – Nifty Quality 30 ETF NFO