HDFC S&P BSE 500 Index Fund (NFO) – How good is this mutual fund?

HDFC Mutual Fund has launched S&P BSE 500 Index that would open for subscription on 6th April, 2023. As the name indicates, HDFC S&P BSE 500 Index Fund would invest in the stocks that are part of S&P BSE 500 Index. This index has delivered 12.4% annualized returns in the last 10 years. Should you invest in HDFC S&P BSE 500 Index Fund NFO? What are the risk factors in this mutual fund?

Also Read: Mahila Samman Savings Account 2023 – Who can invest?

HDFC S&P BSE 500 Index Fund – NFO issue details

Here are the NFO issue details.

Scheme Opens 06-Apr-23
Scheme Closes 18-Apr-23
Scheme reopens for continuous purchase/sale Within 5 business days
Minimum Lumpsum Rs 100
Minimum SIP Rs 100 for 6 months
NAV of the fund Rs 10 during NFO period
Entry Load Nil
Exit Load Nil
Risk Very High
Benchmark S&P BSE 500 Index (TRI)
Fund Manager Mr. Nirman Morakhia
Max TER 1.00%

What is the investment objective of HDFC S&P BSE 500 Index Fund?

To generate returns that are commensurate (before fees and expenses) with the performance of the S&P BSE 500 Index, subject to tracking error.

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

HDFC S&P BSE 500 Index Fund (NFO) – How good is this mutual fund

What is the allocation pattern in this index fund?

Here is how the index fund would invest:

Type of instruments Min % Max % Risk Profile
Securities covered by S&P BSE 500
95% 100% Very High
Debt Securities & Money Market
Instruments, units of Debt Schemes of
Mutual Funds
0% 5% Low to Medium

What does S&P BSE 500 Index contain?

The S&P BSE 500 is designed to be a broad representation of the Indian market. Consisting of the top 500 constituents in the S&P BSE AllCap, the index covers all major industries in the Indian economy.

How is the performance of S&P BSE 500 index?

There are 2 existing mutual funds that were floated 3 years back, however one can look at the overall index performance where this fund would replicate. One can exclude AMC expenses while viewing these returns.

Last 10 years annualised returns – 12.4%

Last 5 years annualised returns – 10%

Last 3 years annualised returns – 27%

Last 1 years returns – minus 2.8%

Why to invest in HDFC S&P BSE 500 Index Fund?

Here are a few reasons to invest in such index funds.

1) This fund invests in the S&P BSE 500 Index which includes large cap / blue-chip stocks, mid cap stocks and small cap stocks. While large cap or blue chip stocks provide stability to a portfolio, Midcap and smallcap stocks can provide very high returns.

2) This fund invests in an index which has a combination of large cap, Midcap and smallcap that offers diversification benefits.

3) This index has provided stable returns in the last 3 to 10 years.

Key Risk Factors of investing in such NFOs

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

1) This index contains Midcap and smallcap stocks which are at high risk.

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

3) Investors should read the SID / KIM / prospectus before investing in such mutual funds.

Also Read: 5 Star Rated Crisil mutual funds in 2023

Should you invest in HDFC S&P BSE 500 Index Fund NFO?

This HDFC NFO invests in S&P BSE 500 Index stocks. This index has generated risk adjusted returns of 12.4% annualized returns in the last 10 years. This index generated negative returns in last 1 year as there is negative sentiment in overall Indian stock markets.

However, investors should note that this fund invests in the index which has Midcap and small cap stocks that are riskier.

High risk investors can invest in such funds for medium to long term perspective.

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Suresh KP

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