Motilal Oswal 5 Year G-Sec ETF – Can we expect past performance of 9.5% annualized returns of Index?

Motilal Oswal 5 Year G-Sec ETF NFO - Should you invest or avoidMotilal Oswal 5 Year G-Sec ETF – Review

Motilal Oswal mutual funds has bunch of ETFs in its portfolio. Now Motilal Oswal MF has come up with 5 year G-Sec ETF that has opened for subscription on 23rd November, 2020. This ETF would replicate and invest in the securities of Nifty 5 Year G-Sec Index. This index has outperformed and gave 9.5% annualized returns in the last 5 years. Can we expect similar performance for Motilal Oswal 5 Year G-Sec ETF NFO? Should we invest in Motilal Oswal 5 Year G-Sec ETF or avoid?

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What are Exchange Traded Funds (ETFs)?

ETFs are generally passively managed mutual fund schemes tracking a benchmark index and reflect the performance of that index. 5 Year G-Sec ETF is where it tracks the Nifty 5 year Benchmark G-Sec Index.

Benefits of investing in an ETF

1) It tracks the index underlying stocks / securities

2) It has a low expense ratio as fund manager would invest in the underlying stocks

Motilal Oswal 5 Year G-Sec ETF – NFO Issue details

This is an open-ended Exchange Traded Fund tracking NIFTY 5 Year Benchmark Index. Here are the ETF NFO issue details.

Motilal Oswal 5 Year G-Sec ETF -NFO Issue Details
Scheme Opens 23-Nov-20
Scheme Closes 02-Dec-20
Scheme reopens for continous purchase/sale Within 5 working days from closure of NFO
Minimum investment (Lumpsump) Rs 500
NAV of the fund Rs 10 during NFO period
Entry Load Nil
Exit Load Nil
Risk Moderately Low Risk
Max Total expense Ratio (TER) 1.00%
Benchmark Nifty 5 yr Benchmark G-Sec Index
Fund Manager Abhiroop Mukherjee

The ETF units would be listed on NSE/BSE within 5 days from the NFO closure.

Download Motilal Oswal 5 Year G-Sec ETF SID

What is the investment objective of this ETF?

The Scheme seeks investment return that closely corresponds (before fees and expenses) total returns of the securities as represented by the Nifty 5 yr Benchmark G-Sec Index (Underlying Index), subject to tracking error. However, there can be no assurance or guarantee that the investment objective of the Scheme would be achieved.

Where does this scheme invest?

The Scheme will invest in the securities which are constituents of Nifty 5 yr Benchmark G-Sec Index in the same proportion as in the Index.

What is the allocation pattern in this ETF?

Here is how the scheme would invest:

Type of instruments Allocation % Risk Profile
Securities constituting Nifty 5 yr Benchmark G- Sec Index 95% to 100% Low to medium
Money Market  instruments, units of liquid
scheme or Motilal Oswal Liquid Fund including TREPS
0% to 5% Low to medium

What does Nifty 5 yr Benchmark G-Sec Index contain?

The ‘Nifty 5 yr Benchmark G-Sec Index’ is a single bond index tracking the most liquid 5 year benchmark security issued by the Government of India. The Index seeks to measure the performance of the most liquid Government of India bond in the 5 year maturity segment. The index is reviewed on a monthly basis.

How is the Performance of Nifty 5 yr Benchmark G-Sec Index?

Let us check how this index performed in the last 10 years in terms of annualized returns and also rolling returns.

Index Performance Returns – Annualized

Performance of NIFTY 5 year benchmark G-Sec Index - Annualised Returns

Index Performance Rolling Returns

Also Read: Equitas Small Finance Bank offers 7.35% FD rates – Is it safe?

How such ETFs can provide indexation benefits?

As per company website, these are compared with SBI FD in terms of returns pre tax and post tax. This indicates the benefits of indexation.

Pre and post tax returns - NIFTY 5 year g-sec index vs SBI FD

Why to invest in Motilal Oswal 5 Year G-Sec ETF?

Here are a few reasons to invest in this ETF.

1) Investing in G-Sec ETF comes with very low risk. It does not have default risks and no lock-in period.

2) NIFTY 5 year G-Sec Index has outperformed and gave 9.5% annualized returns in the last 5 years.  Since inception it gave 8.4% annualized returns. Such returns are higher compared to regular bank fixed deposits.

3) ETFs comes with low expense ratio. Your returns would be higher in this case.

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

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

1) This ETF invest in 5 years G-Sec Index which has market risks. Market risks comprises of change in interest rates, economical and political developments, inflation and other monetary factors. G-Sec bonds value can go down if there is increase in interest rates in coming years. In such case the returns would be very low.

2) Though this ETF invests in underlying G-Sec index securities, there is no assurance that it would generate guaranteed returns.

3) Since this ETF invests and tracks 5 years benchmark Index, one should be willing to invest for 4-5 years. If invested for short term than this, the returns could be low.

4) Investors need to refer to risk factors indicated in the NFO prospectus before investing in such ETFs.

Also Read: DSP Value Fund – Do such funds create value to your portfolio?

Should you invest in the Motilal Oswal 5 Year G-Sec ETF?

Motilal Oswal 5 Year G-Sec ETF invests in underlying securities of NIFTY 5 Year Benchmark G-Sec Index in the same portion. The index has been outperforming since inception. If you observe, the 5 year G-Sec index gave 9.5% annualized returns in the last 5 years and 8.4% annualized since inception. Last 1 year the returns are very high at 11.2% returns which is abnormal. While the past performance may or may not repeat in future, one can expect the returns in similar lines i.e. 9.5% annualized returns (before fund management fees of up to 1%) though not guaranteed. One should note that such investments can fetch good returns if invested for 4-5 years. While you can sell them on stock exchanges and come out of these ETFs, the returns could be on lower side. It is like investing in a medium to long duration debt fund of 4 to 5 years. Are you ready to invest for such tenure, then you can invest in such ETFs. Alternatively you can invest in some of the best medium to long duration mutual fund schemes.

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Suresh KP


  1. I think the whole game of investing in any debt fund including a G-sec fund is dependent upon the interest rate scenario in the economy and RBI’s resolve on this.
    In case it is expected that the interest rate would soften from hereon for the next 4 to 5 years, then, it makes sense to invest in such debt funds including a G-sec fund.
    And in case it is expected that the interest would harden from hereon (because of stubborn and lingering inflation due to government’s continuing fiscal deficit and social expenditures resulting into very low/nil “capital build-up” and also the crude oil price movement), then it does not make any sense at all to invest in such funds. In fact, in such scenario, there could be a post-tax loss after taking into account the inflation index.

    1. Kamal, Interest rate criteria would play major role in G-Sec returns. Since it is for 5 years, all parameters indicated by you is already factored in the last 5 years performance (interest rate movements, curde oil effect etc.,) and would continue in future too.

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