ICICI Pru Nifty 500 Index Fund - Direct (G): NFO Details

The ICICI Pru Nifty 500 Index Fund - Direct (G) is designed for investors seeking long-term capital growth through a diversified portfolio. This fund aims to replicate the performance of the Nifty 500 Index by investing in all its constituent stocks in the same proportion as the index. By adopting a passive investment strategy, the fund seeks to deliver returns closely aligned with the index, while striving to maintain a low tracking error. Although the scheme doesn't guarantee returns, it presents an opportunity for investors to participate in the performance of India's top 500 companies across various sectors.
 

Investment Objective and Strategy

Objective:

The ICICI Pru Nifty 500 Index Fund - Direct (G) aims to replicate the performance of the Nifty 500 Index by investing in the securities included in the index. It strives to achieve returns similar to the Nifty 500 Index, subject to tracking errors, by maintaining the same weightage for each stock as in the index. However, there is no assurance or guarantee that the scheme's investment objective will be fully achieved.

Investment Strategy:

The fund follows a passive investment strategy, which means it does not actively select stocks based on their individual merits. Instead, it mirrors the Nifty 500 Index by holding its constituent stocks in the same weightage. The fund also utilizes exchange-traded derivatives and other financial instruments like treasury bills, money market instruments, and short-term government securities to manage liquidity and maintain alignment with the index.
To ensure adherence to the benchmark, the portfolio is rebalanced within seven calendar days in the event of changes to the index composition, such as the addition, removal, or merger of constituent stocks. This disciplined approach helps the fund remain aligned with its objective of achieving index-like returns.
While the scheme strives for minimal tracking error, variations may occur due to factors like market volatility, operational constraints, or the timing of rebalancing.
Strength and Risks - ICICI Pru Nifty 500 Index Fund - Direct (G)

Strengths:

ICICI Pru Nifty 500 Index Fund - Direct (G) has a few strengths that makes it an attractive option for investors.

Diversification Across 500 Companies: By tracking the Nifty 500 Index, the fund provides exposure to companies across all major sectors, making it a well-diversified option for investors.

Low Management Costs: Passive funds typically have lower expense ratios compared to actively managed funds, making them cost-efficient.

Market Representation: The Nifty 500 Index covers around 96% of India’s market capitalization, providing a comprehensive representation of the Indian equity market.

Simplified Investing: Investors can achieve broad market exposure without needing to select individual stocks or sectors.

Risks:

As with any investment, the ICICI Pru Nifty 500 Index Fund - Direct (G) doesn't come without its risks. Following are few of the risks that investors should be aware of:

Tracking Error: The fund's performance may deviate slightly from the index due to operational factors, such as rebalancing delays or cash drag.

Market Volatility: As the fund mirrors the Nifty 500 Index, it is fully exposed to market fluctuations, and investors may experience volatility in their returns.

No Active Management: The fund doesn't actively respond to market opportunities or risks, which could limit its ability to outperform the index.

Liquidity Risk: In periods of market stress, certain securities in the index might become less liquid, potentially affecting portfolio rebalancing.

Why Invest in ICICI Pru Nifty 500 Index Fund - Direct (G)?

The ICICI Pru Nifty 500 Index Fund - Direct (G) offers an opportunity for investors seeking long-term capital growth through diversified market exposure. By replicating the Nifty 500 Index, the fund provides access to a broad portfolio of large-cap, mid-cap, and small-cap stocks across various sectors, reducing the impact of company-specific or sector-specific risks. Its passive investment approach provides cost effectiveness because, on average, passive funds have lower expense ratios than actively managed funds. Furthermore, the fund's ease of use and transparency make it a desirable choice for investors who want to match their holdings with the general performance of the Indian equities markets without having to engage in active stock selection. This fund is particularly suitable for investors with a long-term horizon who want to benefit from the growth potential of India’s top 500 companies while enjoying the convenience of a professionally managed index fund.