 "Auto to realty: Tata Asset Management launches 6 Index funds targetting growth sectors")
Tata Asset Management Company on Monday launched six six innovative index funds with exposure to key sectors, which it believes has high growth potential in the current economic landscape.
An index fund doesn't try to pick the best stocks or time the market. Instead, it aims to mirror the performance of a chosen index by investing in all the securities (stocks or bonds) that the index includes, and in the same. Since the fund follows the index, it's passively managed. This means there's no fund manager actively trying to beat the market by picking winning stocks. Because index funds are passively managed, they typically come with lower fees compared to actively managed funds.
An index fund doesn't try to pick the best stocks or time the market. Instead, it aims to mirror the performance of a chosen index by investing in all the securities (stocks or bonds) that the index includes, and in the same. Since the fund follows the index, it's passively managed. This means there's no fund manager actively trying to beat the market by picking winning stocks. Because index funds are passively managed, they typically come with lower fees compared to actively managed funds.
Tata Nifty 500 Multicap 50:30:20 Infrastructure Index Fund: This fund focuses on the burgeoning infrastructure sector, allocating capital strategically across large-cap, mid-cap, and small-cap companies (50:30:20 ratio) within the Nifty 500 Multicap Infrastructure Index.
This scheme aims to replicate the performance of the Nifty 500 Multicap Infrastructure Index. With public capital expenditure in infrastructure witnessing a significant surge and factories operating at optimal levels, this fund is for investors who are seeking exposure to India's burgeoning infrastructure sector.
The index methodology for the Tata Nifty 500 Multicap 50:30:20 Infrastructure Index Fund adheres to stringent criteria to ensure optimal representation and performance. With a focus on diversification and risk management, the index imposes maximum market capitalization limits, allocating 50% to large-cap, 30% to mid-cap, and 20% to small-cap stocks.
The portfolio comprises of the top 15 large-cap, top 25 mid-cap, and top 35 small-cap stocks, selected based on their 6-month average free float market capitalization.
A maximum of 75 stocks are selected from the Nifty 500, with each stock limited to a 10% weightage. Furthermore, the index encompasses 41 basic industries that are categorized into 8 macro-economic sectors, ensuring comprehensive sectoral representation.
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Tata Nifty MidSmall Healthcare Index Fund: This fund mirrors the Nifty MidSmall Healthcare Index, capitalizing on the favorable factors driving the healthcare industry, including robust margins, stable pricing pressures in international markets, and increasing health consciousness among consumers. The index selects a maximum of 30 stocks from the Nifty MidSmallcap 400 universe.
Tata Nifty Realty Index Fund: The index fund is positioned to tap into the real estate sector. This fund tracks the Nifty Realty Index, potentially benefiting from factors such as soaring residential demand, rapid sales velocity, and a resilient balance sheet post-RERA implementation.
Comprising a minimum of 10 stocks from the Nifty 500 at the time of review, the Tata Nifty Realty Index Fund ensures a comprehensive representation of the realty sector. These companies are selected based on their average free-float market capitalization (FF market capitalization), with priority given to those with higher FF market capitalization. Additionally, companies must have a FF market capitalization at least 1.5 times greater than the smallest index constituent to be included in the index. The index undergoes a semi-annual review based on data from the preceding six months ending in January and July, ensuring its relevance and accuracy over time.
Tata Nifty Financial Services Index Fund: Replicating the NIFTY Financial Services Index, this fund provides exposure to a diverse range of financial services companies poised for potential growth. It highlights the Indian banking sector's strength, with low default rates and significant credit and deposit growth.
" With a low default rate of 2.9%, attributed to minimal Gross Non-Performing Assets (GNPAs), the sector showcases resilient asset quality. Notably, the industry has experienced significant credit growth at 21%, coupled with a commendable 14% growth in deposits, reflecting a healthy financial ecosystem. Furthermore, the increasing adoption of digital banking services is evident, with a notable 57% year-on-year growth in Unified Payments Interface (UPI) volume," it said in a release.
The Tata Nifty Financial Services Index Fund is constructed with a maximum of 20 stocks and imposes strict limits on single stock weight, not exceeding 33% of the total weight, and restricts the cumulative weight of the top 3 stocks to no more than 62%.
Tata Nifty Auto Index Fund: The fund seeks to replicate the Nifty Auto Index and is designed to reflect the behaviour and performance of the automobiles sector which includes manufacturers of cars, motorcycles, heavy vehicles, auto ancillaries.
"The Indian automotive industry is poised for potential growth in the next decade, driven by favorable demographics, increasing disposable incomes, rapid urbanization, and accessible credit. With mobility becoming perceived as a necessity, rather than a luxury, vehicle ownership is swiftly following suit, reflecting evolving consumer aspirations," said the asset management company.
The Tata Nifty Auto Index Fund selects 15 stocks from the auto sector within the Nifty 500 universe, based on free float market capitalization. To ensure diversification and risk management, the index imposes a single stock cap of 33% and limits the cumulative weight of the top 3 stocks to 62%. Additionally, the index undergoes semi-annual reconstitution and review processes.
Tata Nifty 500 Multicap India Manufacturing 50:30:20 Index Fund: This fund invests in the top-performing manufacturing stocks across various sectors within the Nifty 500 Multicap India Manufacturing Index. It aligns with India's aspirations to become a manufacturing powerhouse, leveraging advancements like improved "Ease of Doing Business" rankings.
"There is a saying 'skate to where the puck is going, not where it has been'. It is instructive for an investor to then see where money is being spent today. More often than not, where the rich spend today, the middle class may spend tomorrow. In that context we have come up with 6 index funds which could participate in the overall India growth story,a' said ," said Anand Vardarajan, Business Head at Tata Asset Management.
The decision to introduce these index funds is backed by rising income levels and compelling consumer trends.
The decision to introduce these index funds is backed by rising income levels and compelling consumer trends.