Navi Mutual Fund Launches Nifty Next 50 Index Fund [NFO Review]

Navi Mutual Fund Launches Nifty Next 50 Index Fund (NFO Review)Flipkart owner, Sachin Bansal backed Navi Mutual Fund has launched Nifty Next 50 Index Fund. This mutual fund would open for subscription on January 1, 2022. As the name indicates, this fund would invest in the stocks that are part of Nifty Next 50 Index. This index has delivered 15% annualized returns in the last 5 years. Earlier Navi Mutual Funds has launched Nifty50 index fund where it was able to garner only Rs 150 Crore thought it indicated as “low expense index fund”. Should you invest in Navi Nifty Next 50 Index Fund New Fund Offer? What are the risk factors in this mutual fund?

Also Read: ICICI Pru launches Passive Multi Asset Fund – Should you subscribe?

Navi Nifty Next 50 Index Fund NFO – Issue details

Navi Mutual Funds is relatively new AMC. Earlier it has launched Nifty 50 index fund indicating as a low cost index fund, however, was able to garner only over Rs 150 Crores. Now they have come up with their 2nd index fund.

This is an open-ended index fund replicating / tracking Nifty Next 50 Index.

Navi Nifty Next 50 Index Fund NFO would open for subscription on Saturday, 1st January and closes on Friday, 15th January, 2022. It reopens within 5 working days for further subscription.

Here are the NFO issue details.

Scheme Opens 01-Jan-22
Scheme Closes 15-Jan-22
Scheme reopens for continuous purchase / sale 21-Jan-22
Minimum Lumpsum Rs 500
Minimum SIP Rs 500 for 12 months
NAV of the fund Rs 10 during NFO period
Entry Load Nil
Exit Load Nil
Risk Very High Risk
Benchmark Nifty Next 50 Index TRI
Fund Manager Mr. Pranav Vasa
Max TER 1.00%

Navi Nifty Next 50 Index Fund SID

What is the investment objective of Navi Nifty Next 50 Index Fund NFO?

The investment objective of the scheme is to invest in companies whose securities are included in the Nifty Next 50 Index and to endeavor to achieve the returns of the index as closely as possible, though subject to tracking error. The objective is that the performance of the NAV of the Scheme should closely track the performance of the Nifty Next 50 Index over the same period subject to tracking error.

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
Equities and equity related securities covered by Nifty Next 50 Index 95% 100% Medium to High
Debt and Money Market Securities 0% 5% Low to Medium

What does Nifty Next 50 Index contain?

1) The NIFTY Next 50 Index represents 50 companies from NIFTY 100 after excluding the NIFTY 50 companies.

2) The cumulative weight of index constituents that are not available for trading in F&O segment (non F&O stocks) is capped at 15% of quarterly rebalance dates.

3) The weightages of non F&O stocks in the index are individually capped at 4.5% of quarterly rebalance dates.

4) The index is re-balanced on semi-annual basis. The cutoff date is January 31 and July 31 of each year.

Here is the list and their weightage in this index by sector and top constituents as of now.

Navi Nifty Next 50 Index Fund - NFO - Sector wise chart

Navi Nifty Next 50 Index Fund - NFO - Top Constituents by weightage

Why to invest in Navi Nifty Next 50 Index Fund NFO?

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 blue chip stocks (beyond NIFTY50) that can provide better risk adjusted returns in the medium to long term.

2) Such index offers diversification benefits at stock level and sector level.

3) This index has provided stable returns in the last 1 year, 5 years and since inception. If you observe, this index gave 14.8% annualized returns in the last 5 years and 16% annualized return 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) As per the review by Freefincal few months back, in short to medium term, Nifty Next 50 index failed to beat Nifty 50 index.

2) It invests up to 5% in debt instruments. There is interest rate risk, credit risk and liquidity risk.

3) While fund manager would invest in the stocks that are part of the index in the same proportion, there could be tracking error and the returns of the index and the fund might differ.

4) Investors should read the SID before investing in such mutual funds.

How is the Performance of Nifty Next 50 Index?

Now, let us look at the performance of the underlying index where this fund is going to invest.

Nifty Next 50 Index - Performance - Inception to 2022

Also Read: Samco Launches its first Mutual Fund – Flexicap Fund – Should you buy?

Should you invest in Navi Nifty Next 50 Index Fund?

Navi Nifty Next 50 Index Fund invests in Nifty Next 50 index stocks. This index has generated risk adjusted returns of 16% annualized return since inception, 15% annualized returns in the last 5 years and 38% returns in last 1 year. Nifty Next 50 index is relatively high risk compared to the Nifty 50 index. High risk investors can invest in such index funds. Moderate to low risk investors should stay away from such investments.

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Suresh KP

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