Kotak Launches Nifty Next 50 Index Fund NFO
Kotak Mutual Fund is launching Nifty Next 50 Index Fund that would open for subscription on 17th February, 2021. As the name indicates, Kotak Nifty Next 50 Index Fund would invest in the Nifty Next 50 Index stocks. This index has delivered 15% annualized returns in the last 25 years since inception. Should you invest in Kotak Nifty Next 50 Index Fund NFO? What are the risk factors in this mutual fund?
NFO Issue details of Kotak Nifty Next 50 Index Fund
This is an open-ended index fund replicating / tracking Nifty Next 50 Index. Here are the NFO issue details.
|Kotak Nifty Next 50 Index Fund NFO – Issue Details|
|Scheme reopens for continous purchase/sale||10-Mar-21|
|Minimum Lumpsum||Rs 5,000|
|Minimum SIP||Rs 1,000 for 6 months|
|NAV of the fund||Rs 10 during NFO period|
|Risk||Very High Risk|
|Max expense Ratio (TER)||1.00%|
|Fund Manager||Mr Devender Singhal
Mr. Satish Dondapati
|Benchmark||Nifty Next 50 Index TRI|
What is the investment objective of the Kotak Nifty Next 50 Index Fund?
The investment objective of the scheme is to replicate the composition of the Nifty Next 50 and to generate returns that are commensurate with the performance of the NIFTY Next 50 Index, subject to tracking errors
There is no assurance or guarantee that the investment objective of the scheme will be realized.
What is the allocation pattern in this index fund?
Here is how the index fund would invest:
|Type of instruments||Min %||Max %||Risk Profile|
|Equity and Equity related securities covered by the Nifty
Next 50 Index
|95%||100%||Medium to High|
|Debt and Money Market Securities||0%||5%||Low to medium|
What does NIFTY100 Nifty Next 50 Index contain?
The NIFTY Next 50 Index represents 50 companies from NIFTY 100 after excluding the NIFTY 50 companies.
NIFTY Next 50 is computed using free float market capitalization method wherein the level of the index reflects total free float market value of all the stocks in the index relative to a particular base market capitalization value. NIFTY Next 50 Index can be used for a variety of purposes such as benchmarking fund portfolios, launching of index funds, ETFs and structured products.
Here is the list and their weightage in this index by sector and top constituents as of now.
Why to invest in Kotak Nifty Next 50 Index Fund?
Here are a few reasons to invest in such index funds.
1) This fund invests in Nifty Next 50 which are part of NIFTY100 and after excluding NIFTY50 stocks. These are large cap stocks and can provide stable returns in the medium to long term.
2) This index has provided stable returns in the last 1 year, 5 years and since inception.
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 index fund invests in 50 stocks beyond NIFTY50 that are part of NIFTY100. This is like investing in direct equity (as it invests in specific stocks). Any investment in direct equity is considered as high risk.
2) It invests up to 5% in debt instruments. There is interest rate risk and risk of downgrade of corporate credit rating.
3) It invests in derivatives. Investments in derivatives are considered as high risk.
4) Investors should read the SID / KIM / prospectus before investing in such mutual funds.
How is the Performance of Nifty Next 50 Index Fund?
Now, let us look at the performance of the underlying index where this fund would going to invest. Total returns include dividends, interest and rights received by the shareholders (if any).
Here is the performance chart of the NAV value movement of this index since inception.
One should note that the index fund would give returns after adjusting management fees. In this fund, it is 1%.
Currently there are only one fund + one ETF which invests in this index (which has a 5+ year performance history).
1) ICICI Prudential Nifty Next 50 Index Fund – 5 year annualized returns 15.3% and 10 year annualized returns 12.6%
2) SBI ETF Nifty Next 50 Index Fund – 5 year annualized returns 16.3%
Should you invest in the Kotak Nifty Next 50 Index Fund NFO?
As the name indicates, Kotak Nifty Next 50 Index Fund invests in Nifty Next 50 index stocks. This index has provided stable returns and delivered 15% annualized return since inception, 13% annualized returns in last 5 years and 13% returns in last 1 year. High risk investors can invest in such index funds. Moderate to low risk investors should stay away from such investments.
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