India's first MF based on BSE Select Biz Groups Index is here: Worth it?

Tata Asset Management has launched India's first  BSE Business Group Index Fund, a first-of-its-kind investment scheme designed to provide investors an exposure to India's leading conglomerates.

 

The fund opened for subscription on November 25, 2024, and closes on December 9, 2024.

 

The Tata BSE Select Business Group Index Fund tracks the BSE Select Business Groups index, comprising companies from seven of India’s largest business groups. These conglomerates span 19 diverse industries, reflecting central themes of India’s economic growth. The fund will include 30 companies from key sectors driving India's future growth, with the financial services sector excluded to focus on other industries.

 

The seven business groups included in the fund are Tata Group, Reliance Industries, Adani Group, Aditya Birla Group, L&T, Jindal Group, and Mahindra Group. The weightage for each group is capped at 23% based on their free-float market capitalization. Currently, the Tata Group has a weightage of 22.7%, Reliance Industries at 22.3%, and L&T Group at 15%.

 

In terms of individual stocks, RIL was the heaviest, with a weightage of 22.26 percent at the end of September. L&T was at 13.50 percent, M&M at 8.43 percent, Tata Consultancy Services (TCS) at 7.16 percent and Ultratech Cement at 3.92 percent.

 

Index Methodology

 

The index methodology of the Tata BSE Business Group Index Fund comprises a maximum of 30 stocks, representing companies within the largest 7 business groups in India. The largest company is based on the 6-month average free-float market capitalization from every group. The next 23 companies are ranked based on 6-month average free-float market capitalization and included in the index.

 

During reconstitution, the existing groups forming part of the index will not be excluded till they continue to be in the top 8 business groups by free float market capitalization. However, if a new group is ranked within

the top 4 based on 6 month average free-float market capitalization, it will be included in the index and the existing bottom placed business group will be excluded from the Index.

 

The composition of the fund is dominated by large cap companies as 25 of the 30 constituents are large caps companies. 

 

Among sectors, Oil, Gas & Consumable Fuels have the highest weightage of 22.89 percent, followed by civil construction at 13.50 percent, information technology at 12.52 percent, metals & mining at 11.66 percent and auto and auto components at 11.54 percent.

 

"Investors could benefit from the power 7 were in the top conglomerates which power the growth story will be a part of the index and one could benefit from a portfolio which is very diversified across sectors while still being with the top 7 business groups," said Anand Vardarajan, Chief Business Officer at Tata Asset Management.

 

“The business groups’ diversified operations, technological advancements, and strong market presence position them as key contributors to the nation's economic aspirations. By investing in this fund, investors can gain exposure to these dynamic companies and participate in India's economic success,” added Vardarajan.

 

Through this fund, investors can get exposure to new-age/up-coming growth-oriented sectors like electric vehicles and battery technology, green energy and smart cities, AI and quantum computing and defense and aerospace, among others.  If you're considering investing in the Tata BSE Business Group Index Fund, the decision should depend on your investment goals. This fund gives exposure to top Indian business conglomerates, offering diversification across multiple sectors. If you're looking for a diversified, long-term investment in large-cap stocks with a focus on major business groups like Tata, Reliance, and Adani, this could be a good option.