Tata Asset Management Company, a pioneer in the mutual fund industry, is pleased to announce the launch of a suite of six innovative index funds today. These index funds are meticulously designed to provide investors with exposure to key sectors having growth potential in the current economic landscape.
Tata Nifty 500 Multicap 50:30:20 Infrastructure Index Fund: This scheme aims to replicate the performance of the Nifty 500 Multicap Infrastructure Index with a strategic allocation ratio of 50:30:20 across large-cap, mid-cap, and small-cap companies. With public capital expenditure in infrastructure witnessing a significant surge and factories operating at optimal levels, this fund presents an opportune investment avenue for those seeking exposure to India’s burgeoning infrastructure sector.
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.
Tata Nifty Realty Index Fund: The index fund is positioned to tap into the thriving 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.
Tata Nifty Financial Services Index Fund: This fund aims to replicates the NIFTY Financial Services Index (TRI), offering exposure to a diverse range of financial services companies poised for potential growth. The Indian banking industry is currently witnessing remarkable growth, underscored by its strong asset quality and robust performance metrics. 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. ( Source: BCG Banking Sector Roundup 9MFY24)
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.
Tata Nifty 500 Multicap India Manufacturing 50:30:20 Index Fund: With India’s significant advancements, including its improved ranking in the World Bank’s Ease of Doing Business, driven by initiatives such as GST implementation, performance-linked investment scheme, RERA policy, and digitalization, the manufacturing landscape presents compelling opportunities for investors. Moreover, the fund’s focus on top-performing stocks from diverse sectors within the manufacturing theme aligns with India’s trajectory towards becoming a manufacturing powerhouse.
At the launch, Anand Vardarajan, Business Head at Tata Asset Management said: “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.
The decision to introduce these index funds is backed by rising income levels and compelling consumer trends. Rising auto demand with sustainability and green energy are powering the growth of this sector. Factories are operating at near-maximum capacity, indicating near peak production capacity spurring manufacturing growth. The healthcare industry presents potential opportunities driven by strong margins, stabilized pricing pressures in international markets, and increasing health awareness. The real estate sector is buoyed by robust residential demand, rapid sales velocity, and a resilient balance sheet post-RERA implementation. The BFSI sector has demonstrated resilience amidst various challenges, potentially benefitting from economic growth, increased disposable incomes, and technological advancements. Infrastructure connectivity increases ease of travel and presents a good long-term potential for growth. All these augurs very well from a long-term investment portfolio perspective.”
Index Methodology :
Each index fund adheres to a meticulous methodology to ensure optimal performance and
representation of the respective sectors. The construction of the indices involves careful
selection criteria, including market capitalization, sectoral representation, and periodic
reviews.
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.
The Tata Nifty MidSmall Healthcare Index Fund targets the healthcare sector through two main segments: pharmaceuticals and healthcare services. With a focus on capturing the diverse facets of the healthcare sector, the index selects a maximum of 30 stocks from the Nifty MidSmallcap 400 universe.
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.
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%. Selection criteria prioritize stocks available in the Futures & Options segment, maintaining identical weightage between selected constituents and their respective subsectors. Furthermore, a semi-annual review process ensures adherence to these rules, safeguarding the integrity and accuracy of the index composition.
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 to maintain its integrity and relevance over time.
The Tata Nifty 500 Multicap India Manufacturing Index Fund has a diversified portfolio comprising 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. 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 index ensures comprehensive coverage of the manufacturing sector, with a maximum of 75 stocks selected from the Nifty 500 universe, representing 30 basic industries clubbed into 10 sectors. Each stock is subject to a strict weightage limit of 10%, promoting diversification and minimizing concentration risks.
The launch of these index funds caters to the evolving need of our investors and provides access to promising sectors poised for potential growth in the Indian economy.
