ICICI Prudential MF launches India's first oil & gas ETF: Should you invest

Scheme tracks Nifty Oil & Gas TRI, an index that reflects the performance of companies in the oil and gas sector

ICICI Prudential Mutual Fund has launched the ICICI Prudential Nifty Oil & Gas ETF, India's first exchange traded fund (ETF) in the oil and gas sector. The scheme will track the Nifty Oil & Gas TRI, an index that reflects the performance of listed sector companies.

 

Nifty Oil & Gas (TRI)
 

The Nifty Oil & Gas Index comprises a maximum of 15 stocks listed on the National Stock Exchange. The selection ensures that no single company holds more than 33 per cent of the weight and the combined weight of the top three companies does not surpass 62 per cent of the index. This ensures a balanced and diversified exposure.
 

Performance of the Index: Calendar year returns (%)

 

Nifty Oil & Gas TRI has Outperformed the Nifty 500 TRI six times in the last 10 years. Year to date (as on June 20, 2024), the index has been outperforming the Nifty 500 TRI.

 

The Nifty Oil & Gas Index is updated twice a year to reflect the sector's performance accurately and has outperformed broader market indices broader market indices in many years, demonstrating its potential for delivering strong returns. (See graph)

 

ICICI Prudential Nifty Oil & Gas ETF portfolio snapshot

 

Reliance Industries Ltd. (34.14 per cent)

Oil & Natural Gas Corporation Ltd.(15.31 per cent)

Indian Oil Corporation Ltd.(8.70  per cent)

Bharat Petroleum Corporation Ltd. (8.49  per cent)

GAIL (India) Ltd. (8.47  per cent)

Hindustan Petroleum Corporation Ltd.(4.55  per cent)

Oil India Ltd. 3.70 Petronet LNG Ltd.(3.55  per cent)

Adani Total Gas Ltd. (3.53  per cent)

Indraprastha Gas Ltd. (2.52 per cent)
 

Investment period
 

NFO opened on July 8 and will close on July 18, 2024.

 

Investment Objective

 

ICICI Prudential Nifty Oil & Gas ETF’s performance will be benchmarked against Nifty Oil & Gas TRI. NFO of ICICI Prudential Nifty Oil & Gas ETF is suitable for investors seeking long-term wealth creation. It is an Exchange Traded Fund that aims to provide returns that correspond to the returns provided by Nifty Oil & Gas Index, subject to tracking error.

 

Fund type

 

This is an open-ended scheme, meaning investors can redeem their units at any time.

It's an index fund, which passively invests in the companies that comprise the Nifty Oil & Gas TRI.
 

Fund managers:
 

Nishit Patel and Priya Sridhar
 

Minimum investment:
 

Rs 100 (plus in multiple of Re 1).
 

Investment charges:
 

There is no exit load for units sold in the secondary market (BSE/NSE). However, investors are responsible for any brokerage fees incurred during the sale.

 

“ICICI Prudential Nifty Oil & Gas ETF is designed to provide investors with access to a sector that is pivotal to the economy and is currently undervalued. The oil and gas sector is the driving force of modern economic growth, and with growing demand and consumption, it presents a significant investment opportunity. Our ETF aims to allow investors to capitalise on the resurgence in global interest in this sector,” said Chintan Haria, principal - investment strategy at ICICI Prudential AMC.
 

Investment allocation:
 

The fund allocates its assets primarily to equity and equity-related securities of companies that are part of the Nifty Oil & Gas Index, with an indicative allocation ranging from a minimum of 95 per cent to a maximum of 100 per cent of the total assets.

 

To maintain liquidity and manage short-term cash flow needs, the fund also allows for a small allocation to money market instruments, including TREPs, with a maximum limit of 5 per cent of total assets.
 

Risk profile:

 

The scheme involves “very high risk”, according to the information document.

 

Why invest in ICICI Prudential Nifty Oil & Gas ETF?

 

It provides exposure to companies within the oil and gas sector

 

Enables diversification across different segments of the oil and gas value chain

 

Historically, the Nifty Oil & Gas Index has had a strong performance with a favourable valuation compared to broader market indices

 

Important Note:
 

Mutual fund investments are subject to market risks. Investors are advised to carefully read all scheme-related documents before investing.