Motilal Oswal S&P 500 Index Fund NFO – Should you invest when we are entering into recession?

Motilal Oswal S&P 500 Index Fund NFO ReviewMotilal Oswal S&P 500 Index Fund NFO Review

Motilal Oswal MF has come up with a global fund, Motilal Oswal S&P 500 Index Fund where it would be replicating / tracking S&P 500 Index. This fund has opened for subscription on 15th April, 2020 and would close by 23rd April, 2020. Motilal Oswal MF already has existing NASDAQ 100 ETF that invests in US Top 100 stocks and it is coming with one more fund in this segment that would invest in Top 500 index stocks. In this article, we would indicate about Motilal Oswal S&P 500 Index Fund issue details and whether you should invest or avoid when we are entering into recession.

Also Read: ICICI Home Finance FD offers 11.39% Yield – Should you invest?

Issue details of Motilal Oswal S&P 500 Index Fund (NFO)

This is an open-ended mutual fund equity scheme.

This scheme would open for subscription on 15th April, 2020.

This scheme would close for subscription on 23rd April, 2020.

Since this is an open ended scheme, it would again open for subscription after 5 business days from the date of allotment of Mf units after the NFO period.

This scheme is available in both regular and direct plans.

This plan offers both growth option and dividend option.

This scheme is available for lump sum and SIP investment.

Minimum investment is Rs 500 and in multiples of Rs 1 there-off for lump sum investments.

Minimum investment is Rs 500 per month for monthly SIP and for a tenure of 12 months.

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

There is no entry load to invest in this mutual fund scheme.

There is an exit load of 1% if the mutual fund units are redeemed within 3 months from the date of allotment.

This scheme is classified as HIGH risk scheme.

Scheme total expense ratio (TER) is estimated 0.5% for direct plan and 1% for regular plans.

Download Motilal Oswal S&P 500 Index Fund NFO details here.

What is the investment objective and strategy of this Motilal Oswal S&P 500 Index Mutual Fund NFO?

The mutual fund scheme seeks investment returns that corresponds to the performance of S&P 500 Index subject to tracking error. However, there can be no assurance or guarantee that the investment objective of the Scheme would be achieved.

Who can invest in this mutual fund scheme?

The following can invest in this scheme.

1) Resident adult individuals, either singly or jointly.

2) Minors through Parents/Lawful Guardian.

3) Hindu Undivided Family (HUF) through its Karta.

4) Partnership Firms in the name of any one of the partners.

5) Proprietorship in the name of the sole proprietor.

6) Companies, Body Corporate, Societies, Association of Persons, Body of Individuals, Clubs and Public Sector Undertakings registered in India if authorized and permitted to invest under applicable laws and regulations.

7) Banks

Complete list of eligible participants who can invest can be checked in prospectus of this new fund offer.

Who is the Fund Manager of Motilal Oswal S&P 500 Index Mutual Fund NFO?

The Fund Managers are:

1) Mr. Herin Visaria – For Foreign Securities

2) Mr. Abhiroop Mukherjee – For Debt Component

What is the benchmark for this scheme?

The benchmark for this scheme is S&P 500 Index (TRI).

What is the allocation pattern in this mutual fund scheme?

Motilal Oswal S&P 500 index fund is an index fund which invests in the companies that are part of the S&P 500 Index (US) in the same weightage as in the index. The objective of this fund is to seek investment return corresponds to (before fees & expenses) the performance of the S&P 500 Index (US), subject to tracking error.

Also Read: Should you use emergency fund now during this corona-virus crisis?

How S&P 500 TRI performed comparing to Nifty 500 TRI?

This gives indication as to how this index is performed compared to NIFTY 500 TRI (Indian index). Too tempting right. This is because you are seeing this from base 100 from 2010 onwards. Just see how it looks between 2015 or 2018 onwards.

Motilal Oswal S&P 500 Index Fund - Performance of S&P 500 Vs NIFTY 500 TRI

Does dollar hedge really gets benefited?

Just see this chart. What a wonderful growth right. Hold on. This is showing an amazing picture because you are seeing with a single base in the last 20 years. See this base with 2015 or 2018, you would see right picture.

Motilal Oswal S&P 500 Index Fund - USD and INR grew chart

Why to invest in the Motilal Oswal Fund?

Here are a few reasons to invest in this fund.

1) The S&P 500 index in the US is widely regarded as the best single gauge of largecap US equities. The index is designed to measure the performance of the leading 500 companies listed in the United States and covers approximately 80% of available market capitalization.

2) S&P 500 Index has low correlation Indian stock market. This would help for diversification of your portfolio.

3) S&P 500 Index companies have global exposure in terms of sales. This would help not concentrate on domestic sales alone.

4) S&P 500 index dividend yield is at year 5 high and well above historical average.

5) Indian investors can benefit from dollar hedge / USD appreciation by investing in such global mutual funds.

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) The risk of investing in foreign securities carries an exchange rate risk related to depreciation of foreign currency and country risks.

2) The Scheme shall invest in securities listed on the overseas stock exchange. Hence all the risk factors pertaining to overseas stock exchange like market trading risk, liquidity risk and volatility risk, as mentioned earlier, are also applicable to the Scheme.

3) We are seeing global recession started and yet to see it in the US economy. This is not like 2008 recession where it bounced back in just 1-2 years. Under covid-19 situation, this recession would take longer time to recover.

How is the Performance of International or Global Mutual Funds in India?

Now, let us look at some of the existing international mutual funds in India.

#1 – ICICI Prudential Bluechip Equity Fund: This mutual fund gave 11% annualized returns in the last 5 years and 15% annualized returns in the last 3 years and 10% returns in the last 1 year.

#2 – Franklin US Feeder Fund: This mutual fund gave 11.5% annualized returns in the last 5 years and 18% annualized returns in the last 3 years and 13% returns in the last 1 year.

Should you invest in the Motilal Oswal S&P 500 Index Fund NFO?

Motilal Oswal S&P 500 Index Fund is a global MF scheme that invests in S&P 500 US equity. We are just entering a global recession where one can see job cuts / layoffs, salary cuts and economy can go deep into recession. US Top 500 S&P company’s revenues are expected to fall. You don’t need to be in a hurry to invest in such funds as of now. The recession would be deeper and may or may not bounce back the way it happened in 2008/2009. If you have surplus funds and want to experiment with new international funds, you can invest in such funds. If you still want to invest in global funds even understanding current risk factors, investing in existing international mutual funds that invests in US economy could be better.

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Suresh KP

Motilal Oswal S&P 500 Index Mutual Fund NFO Review

Suresh KP


  1. I have already invested in this fund before reading this article, but for a small amount of Rs.5000/- only. Let’s hope for good returns.

  2. The tax implication is not clear. Will it be treated as debt fund for tax purposes?

    1. Hello Krishna, From the taxation perspective, Global / international mutual funds are treated like debt mutual funds. 1) For a holding period of less than 3 years, one is required to pay short term capital gains tax on the profits as per your income tax slab. 2) If the fund is held for more than 3 years, the investor will get indexation benefit as the profit is treated as long-term capital gain. Post indexation, the gain is taxed at 20%.

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