Upcoming NFOs in India 2024

Just as equities mutual funds are becoming more & more popular, so too are new fund offers. New fund offers (NFO) inflows into mutual fund sector in August 2024 were ₹ 13,815 cr, distributed across 18 NFOs. Compared to ₹ 16,565 cr spent in 15 NFOs in July 2024, this represented drop. Five of eighteen NFOs that were introduced in August 2024 were themed funds, & one was classified as big cap. Surprisingly, in August 2024, theme funds constituted substantial 73.8% of overall NFO flows.

1. SBI Nifty 500 Index Fund

SBI Mutual Fund has extended New Fund Offer (NFO) period for its SBI Nifty 500 Index Fund to September 26, 2024. This open-ended index fund aims to replicate performance of Nifty 500 Index, which covers top 500 companies by market capitalization across large-cap, mid-cap, & small-cap segments. Fund offers low-cost exposure to 92.1% of total market capitalization of companies listed on NSE, providing diversified investment option.

Introduction & Objective
SBI Nifty 500 Index Fund is open-ended index fund designed to replicate performance of Nifty 500 Index. Launched by SBI Mutual Fund, this index fund offers exposure to broad range of large, mid, & small-cap stocks by tracking Nifty 500 Index. index comprises top 500 companies by market capitalization, providing holistic snapshot of Indian equity market. This fund offers cost-effective way to diversify across sectors & company sizes, giving investors opportunity to benefit from overall performance of Indian economy.

Extension of NFO Period 
Initially scheduled to close on September 24, 2024, New Fund Offer (NFO) period has been extended to September 26, 2024. This extension allows additional time for investors to participate in fund, ensuring they have opportunity to tap into broad market exposure offered by this product.

Key Features

1. Diversified Exposure: Nifty 500 Index captures about 92.1% of full market capitalization of all companies listed on NSE. As result, SBI Nifty 500 Index Fund provides exposure to broad spectrum of Indian equity market, spanning large, mid, & small-cap segments.

2. Cost-Effective Investment: As index fund, this product aims to deliver returns that match Nifty 500 Total Returns Index, but with low management fees & minimal transaction costs. This makes it suitable option for investors looking for long-term capital appreciation without high fees associated with active management.

3. Tracking Error: Fund seeks to replicate performance of Nifty 500 Index, but due to presence of tracking errors, actual returns may vary slightly from benchmark.

4. Investment Allocation: Fund will allocate 95% to 100% of its assets to stocks in Nifty 500 Index. Remaining portion may be invested in liquid instruments or government securities.

5. Investment Strategy: Strategy is to passively invest in top 500 companies, reflecting performance of India’s economy across sectors. Passive investing eliminates risks associated with stock-picking & human bias in decision-making.

SIP & Minimum Investment
Minimum investment during NFO period is ₹5,000, followed by increments of ₹1. fund also offers Systematic Investment Plan (SIP) options with daily, weekly, monthly, or annual frequencies, making it accessible to investors with varying levels of capital.

Investment Case
Given broad exposure & low cost, SBI Nifty 500 Index Fund is ideal for retail investors seeking exposure to India's equity markets. Investors with long-term horizon can benefit from growth of Indian economy as represented by its largest & most significant companies across different sectors. 

2. HDFC Nifty LargeMidcap 250 Index Fund

Introduction & Objective 
HDFC Nifty LargeMidcap 250 Index Fund, launched on September 20, 2024, is open-ended index fund that tracks performance of Nifty LargeMidcap 250 Total Returns Index. This fund seeks to provide balanced exposure to both large-cap & mid-cap stocks in Indian market, thus offering investors combination of stability (from large-caps) & growth potential (from mid-caps). Fund will remain open for subscription until October 4, 2024.

Key Features

1. Balanced Exposure: Nifty LargeMidcap 250 Index includes stocks from both Nifty 100 Index (large-cap) & Nifty Midcap 150 Index (mid-cap), with 50:50 allocation. This balanced approach ensures that investors gain from financial strength & market dominance of large-cap companies while benefiting from rapid growth often seen in mid-cap stocks.

2. Quarterly Rebalancing: Portfolio is rebalanced every quarter to maintain 50:50 ratio between large & mid-cap stocks. This rebalancing ensures consistent risk profile & guards against excessive concentration in any one market segment. It also ensures that investors do not trigger taxable events due to fund's quarterly rebalancing.

3. Passive Investment Strategy: As index fund, HDFC Nifty Large-Midcap 250 Index Fund follows passive investment strategy, aiming to replicate performance of index without active stock-picking. This results in lower management fees & eliminates human bias.

4. No Upper Limit on Investment: Investors can start with minimum of ₹100 during NFO period, & there is no upper limit on investment, making fund accessible to investors across different capital levels.

Management & Portfolio Composition
Fund will be managed by Nirman Morakhia & Arun Agarwal, who bring considerable expertise in index-based investment strategies. Fund will invest in 250 stocks, equally divided between large & mid-cap segments, ensuring diversified exposure across sectors & market sizes.

Investment Case
This fund is ideal for investors seeking to achieve diversified portfolio that includes both stability & growth. Large-cap stocks provide defensive layer, while mid-cap stocks offer higher growth potential, making this fund suitable for investors with moderate risk tolerance. Quarterly rebalancing also ensures that investors maintain exposure to both large & mid-cap segments without having to monitor market constantly.

3. WhiteOak Capital Digital Bharat Fund

Introduction & Objective
WhiteOak Capital Digital Bharat Fund is open-ended equity scheme that focuses primarily on technology sector & technology-related companies. Objective of fund is to generate long-term capital appreciation by investing in companies that are leading digital transformation in India. This fund provides investors with thematic approach to investing in India’s growing digital economy, which is poised to revolutionize multiple industries across country.

Key Features

1. Sectoral Focus: Digital Bharat Fund targets companies that are involved in technology sector or are leveraging technology to improve their business models. This includes sectors such as IT services, software, digital infrastructure, e-commerce, fintech, & digital healthcare.

2. High Growth Potential: As India undergoes rapid digital transformation, technology companies are well-positioned for high growth. Fund seeks to capitalize on trends such as increasing penetration of internet, digital payments, cloud computing, & artificial intelligence, which are driving next wave of economic growth.

3. Portfolio Allocation:
   - 80%-100% in equity & equity-related instruments of technology & technology-related companies.
   - 0%-20% in equity-related instruments of non-tech companies.
   - 0%-20% in debt securities & money market instruments to maintain liquidity.
   - 0%-10% in units issued by REITs (Real Estate Investment Trusts) & InvITs (Infrastructure Investment Trusts).

4. Benchmark: Fund's performance is benchmarked against BSE Teck TRI Index, which tracks top technology companies listed on Bombay Stock Exchange.

Management Team
Fund will be managed by experienced team:
- Ramesh Mantri (Equity)
- Trupti Agarwal (Assistant Fund Manager, Equity)
- Dheeresh Pathak (Assistant Fund Manager, Equity)
- Piyush Baranwal (Debt)

Investment Case
Digital Bharat Fund is suitable for investors who are looking for high-growth opportunities & are comfortable with sector-specific risk. Technology is becoming critical growth driver in Indian economy, & this fund allows investors to tap into this trend. However, due to its focus on technology sector, fund carries higher risk than diversified equity funds.

4. LIC MF Manufacturing Fund

Introduction & Objective

LIC MF Manufacturing Fund is open-ended equity scheme that aims to provide long-term capital appreciation by investing in companies within manufacturing sector. fund focuses on industries that are at core of India's manufacturing growth, driven by government initiatives such as Make in India & Atmanirbhar Bharat.

Key Features

1. Sector-Specific Focus: fund invests in manufacturing companies across various industries, including automobiles, pharmaceuticals, chemicals, heavy engineering, metals, shipbuilding, & petroleum products.

2. Government Support: Indian government's initiatives, such as Production Linked Incentive (PLI) Scheme, are aimed at boosting manufacturing output & positioning India as global manufacturing hub. This fund seeks to capitalize on favorable environment for manufacturing in India.

3. Portfolio Allocation:
   - 80%-100% in equity & equity-related instruments of manufacturing companies.
   - 0%-20% in companies outside manufacturing sector for diversification.
   - 0%-20% in debt & money market instruments.
   - 0%-10% in REITs & InvITs.

4. Benchmark: fund is benchmarked against Nifty India Manufacturing Index, which reflects performance of manufacturing companies in India.

Investment Case
This fund is well-suited for investors who are bullish on India's manufacturing sector & seek to benefit from long-term capital appreciation. sector is expected to play critical role in making India $5-trillion economy by 2027. However, fund's sectoral focus implies that it may experience higher volatility, & investors should assess their risk tolerance before investing.