ICICI Prudential Alpha Low Vol 30 ETF – Should you invest in Low Volatile Index Stocks?

ICICI Prudential Alpha Low Vol 30 ETF ReviewICICI Prudential Alpha Low Vol 30 ETF Review


ICICI Prudential MF is planning to launch ICICI Prudential Alpha Low Vol 30 ETF that would open for subscription on August 3, 2020. This is an open ended index exchange traded fund tracking Nifty Alpha Low Volatility 30 Index. The units would be listed on BSE and NSE. What are the issue details of the ICICI Prudential Alpha Low Vol 30 ETF? Should you invest in the ICICI Prudential Alpha Low Vol 30 ETF? What are the risk factors in this ETF?

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What are Exchange Traded Funds (ETFs)?

Wikipedia defines ETF as “an exchange-traded fund is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds and generally operates with an arbitrage mechanism designed to keep it trading close to its net asset value, although deviations can occasionally occur”.

Issue details of ICICI Prudential Alpha Low Vol 30 ETF

This is an open-ended scheme replicating/ tracking Nifty Alpha Low-Volatility 30 Index.

This scheme would open for subscription on August 3, 2020.

This scheme would close for subscription on August 10, 2020.

Since this is an open ended scheme, it would again open for subscription after 5 days from the initial ETF closure period.

Minimum investment is Rs 5,000 and in multiples of Rs 1 there-off.

The NAV of the ETF is Rs 10 per unit during the initial subscription.

There is no entry load to invest in this ETF.

There is no exit load in this ETF.

This scheme is classified as moderately high risk scheme.

Scheme total expense ratio (TER) is estimated at 1%.

Download ICICI Prudential Alpha Low Vol 30 ETF details here

What is the investment objective of ICICI Prudential Alpha Low Vol 30 ETF?

The investment objective of the scheme is to provide returns before expenses that closely correspond to the total return of the underlying index subject to tracking errors.

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There is no assurance or guarantee that the investment objective of the scheme will be realized.

Who is eligible to invest in this mutual fund scheme?

All residential Indians, mutual fund schemes, HUFs, companies and NRIs can invest in this scheme.

What is the benchmark for this scheme?

The benchmark for this scheme is Nifty Alpha Low-Volatility 30 Index.

What is the allocation pattern in this ETF scheme?

This ETF investment pattern is as follows:

1) It invests 95% to 100% in securities constituting Nifty Alpha Low-Volatility 30 Index. The risk profile in this segment is medium to high.

2) It would invest 0% to 5% in debt schemes, TREPs, Repo and Reverse Repo, cash or cash equivalent. The risk profile in this segment is low to medium.

3) It would invest 0% to 5% in derivatives. The risk profile in this segment is low to medium.

4) It would invest 0% to 5% in units of debt ETFs. The risk profile in this segment is low to medium.

What does Nifty Alpha Low-Volatility 30 Index contain?

Nifty Alpha-Low Volatility 30 Index designed to reflect the performance of a portfolio of stocks selected based on top combination of Alpha and Low Volatility. The index is intended to counter the cyclicality of single factor index strategy and provides investors with a choice to take exposure to multiple factors through a single index product. The Index consists of 30 stocks selected from NIFTY 100 and NIFTY Midcap 50.

Here is the list and their current stock prices as on 31 July, 2020.

Industry Company Name
AUTOMOBILE Bajaj Auto Ltd.
AUTOMOBILE MRF Ltd.
CEMENT Shree Cement Ltd.
CHEMICALS Pidilite Industries Ltd.
CONSUMER GOODS Asian Paints Ltd.
CONSUMER GOODS Bata India Ltd.
CONSUMER GOODS Berger Paints India Ltd.
CONSUMER GOODS Britannia Industries Ltd.
CONSUMER GOODS Colgate Palmolive (India) Ltd.
CONSUMER GOODS Dabur India Ltd.
CONSUMER GOODS Hindustan Unilever Ltd.
CONSUMER GOODS Marico Ltd.
CONSUMER GOODS Nestle India Ltd.
CONSUMER GOODS Voltas Ltd.
IT HCL Technologies Ltd.
IT Tata Consultancy Services Ltd.
IT Wipro Ltd.
OIL & GAS Indraprastha Gas Ltd.
OIL & GAS Petronet LNG Ltd.
OIL & GAS Reliance Industries Ltd.
PHARMA Biocon Ltd.
PHARMA Cadila Healthcare Ltd.
PHARMA Cipla Ltd.
PHARMA Divi’s Laboratories Ltd.
PHARMA Dr. Reddy’s Laboratories Ltd.
PHARMA Lupin Ltd.
PHARMA Torrent Pharmaceuticals Ltd.
POWER NTPC Ltd.
POWER Power Grid Corporation of India Ltd.
POWER Torrent Power Ltd.
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Why to invest in the ICICI Prudential Alpha Low Vol 30 ETF?

Here are a few reasons to invest in such ETF schemes.

1) This ETF aims to counter the cyclical theory of single factor index structure strategy. The index provides exposure to a portfolio of stocks from various sectors, based on combination of alpha and low volatility. Low volatility stocks or index helps to reduce the downside of the value.

2) Though this index is formed 3 years back in reality, the index constituents (based on the methodology) gave 10% annualized returns in the last 5 years and 18% annualized returns in the last 15 years.

2) Since this is an ETF, you can buy or sell such ETFs on NSE during market hours. Hence this is a liquid investment.

Some key risk factors you should consider before you invest in such funds

One should consider some of these risk factors / negative factors before investing.

1) This ETF focuses on 30 stocks which are part of the defined Index.
Investing in a single set of stocks is  HIGH RISK.

2) There are several companies in the Nifty Alpha Low-Volatility 30 Index that are facing margin pressure due to ramp down of projects during covid-19 crisis. We are already seeing this now in the quarterly results. Reduced profits and revenues would impact the share prices and the NAV of the ETF would get affected.

4) You can refer complete risk factors of investing in this particular scheme in SID / KIM / NFO prospectus.

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How is the Performance of Nifty Alpha Low-Volatility 30 Index?

Though this index formed in July, 2017 (3 years back), they have considered the constituents and publishing the index performance of the last 15 years. This index gave 18% annualized total returns in the last 15 years and 10% annualized total returns in the last 5 years. Here is the last 15 years chart of index movement till 30 June, 2020.

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ICICI Prudential Alpha Low Vol 30 ETF - Performance in the last 15 years - 2005-2020

Should you invest in the ICICI Prudential Alpha Low Vol 30 ETF?


The ICICI Prudential Alpha Low Vol 30 ETF invests in underlying stocks of the NIFTY Alpha Low Vol 30 ETF which are considered as low volatile. Though the performance between 2005 to 2015 is very good, it is on the lower side side during 2015-2020. Covid-19 also would have an impact on such underlying companies for the next couple of quarters. If you are a high risk investor and willing to invest in medium to long term, you can invest in this scheme. Short term investors and low risk investors should avoid this scheme.

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Suresh KP

2 comments

  • Alok Varma

    Thanks for your sharing information

  • R Ramakrishna

    It is foolish to subscribe to this scheme at this juncture when every thing including human lives is uncertain.It is another ploy of AMCs to garner money from investors
    Let the interested investors wait till its NAV stabilises after the issue reopens.I am quite sure the NAV will come down to Rs8 to Rs6.Wait/wait/wait

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