Navi Mutual Funds has launched Manufacturing Index Fund (new fund offer). This NFO would open for subscription on 12th August, 2022. This mutual fund scheme would invest majorly in companies that are part of the Nifty Manufacturing Index. This index has delivered 9.5% annualized returns in the last 5 years. Should you invest in Navi Nifty India Manufacturing Index Fund NFO? What are the various risk factors associated with such funds?
Also Read: Midcap Mutual Fund gave 28% returns in 1 year Vs Benchmark return 6%
Navi Nifty India Manufacturing Index Fund (NFO) – Issue details
Navi Nifty India Manufacturing Index Fund is an open-ended equity scheme that invests in companies that are part of the Nifty manufacturing index.
| Scheme Opens | 12-Aug-22 |
| Scheme Closes | 23-Aug-22 |
| Scheme reopens for continuous purchase/sale | Within 5 working days |
| 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 India Manufacturing TRI |
| Fund Manager | Mr. Girish Raj |
| Max TER | 1.00% |
Navi Nifty India Manufacturing Index Fund Draft SID
What is the investment objective of this MF scheme?
The investment objective of the scheme is to achieve returns equivalent to Nifty India Manufacturing Index by investing in stocks of companies comprising the Nifty India Manufacturing Index, 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 mutual fund?
This fund invests pattern is as follows:
| Type of instruments | Min % | Max % | Risk Profile |
|---|---|---|---|
| Equities and equity related securities covered by Nifty India Manufacturing Index | 95% | 100% | Medium to High |
| Debt and Money Market Securities | 0% | 5% | Low to Medium |
What does Nifty Manufacturing Index Contains?
This Index which aims to track the performance of the companies selected from the combined universe of Nifty 100, Nifty Midcap 150 and Nifty Smallcap 50 index based on 6 month average free-float market.
This index was launched in Aug-2021 and back tested for the last 15 years.
This index contains 79 companies as of now.
The majority of this segment contains companies from capital goods, automobile and auto components, healthcare, metals and mining and chemicals.
Beta of the fund is ranging between 0.91 to 0.93 in the last 5 years.
Here are the Top-10 holdings:
| Company | %age |
|---|---|
| Sun Pharmaceutical Industries Ltd | 5.2 |
| Reliance Industries Ltd | 4.6 |
| Tata Steel Ltd | 4.5 |
| Maruti Suzuki India Ltd | 4.1 |
| Mahindra & Mahindra Ltd | 3.9 |
| JSW Steel Ltd | 3.2 |
| Hindalco Industries Ltd | 3.2 |
| Tata Motors Ltd | 2.9 |
| Cipla Ltd | 2.8 |
| Dr Reddy’s Labs | 2.6 |
Past Performance of this manufacturing index
Below is the performance of this index for the last 1 year, 5 years and 17 years (back tested data as this index was launched 1 year back only).
Why to invest in Navi Nifty India Manufacturing Index Fund NFO?
Here are the major reasons to invest in this fund
1) Manufacturing sector could be the next growth driver in India as there is strong government support through Production Linked Incentive Scheme and Make in India.
2) This fund provides an opportunity for investors to participate in emerging segments like electric vehicles, electronics, battery technology, defence etc.,
3) The underlying index delivered stable returns in the last 5 years.
Risk factors in such funds
One should consider some of these risk factors / negative factors before investing.
1) This fund is classified as a thematic fund i.e. It invests only in manufacturing companies that are part of the Nifty Manufacturing index. Investing in thematic mutual funds is high risk.
2) This segment has under-performed compared to other equity mutual funds. This segment generated 9.5% annualized returns in the last 5 years compared to Nifty50 index returns of over 12% for similar period.
3) You can refer complete risk factors of investing in this scheme to SID / KIM / NFO prospectus.
Navi Nifty India Manufacturing Index Fund NFO – Should you invest?
This fund invests in companies that are part of manufacturing index. Since it invests in only manufacturing companies, these are high risk. While the returns are on the lower side, since make in India has been picking up in the last 3 to 5 years, such funds can deliver good returns if held for over 5 years. High risk investors who want to test with new funds can invest in this NFO. Otherwise, one can look at some of the Top Thematic Mutual Funds for 2022 that already have proven performance.
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One of the best reviews on this NFO. Thank you.