Groww Nifty 500 Momentum 50 ETF – Direct (G) : NFO Details

Groww Mutual Fund has launched the Groww Nifty 500 Momentum 50 ETF, an open-ended exchange-traded fund (ETF) that aims to provide long-term capital growth by investing in stocks from the Nifty 500 Momentum 50 Index. The fund seeks to replicate the index’s performance by maintaining the same proportion and weightage of securities, subject to tracking errors. The New Fund Offer (NFO) opens on April 3, 2025, and closes on April 17, 2025. With a minimum investment requirement of ₹500, the scheme charges no entry or exit load, making it an attractive choice for investors looking to gain exposure to momentum-based stocks in the Nifty 500 index. However, returns are subject to market risks, and achieving the investment objective is not guaranteed.

Details of the NFO: Groww Nifty 500 Momentum 50 ETF – Direct (G)

Investment Objective and Strategy

Objective:

The investment objective of the Scheme is to generate long-term capital growth by investing in securities of the Nifty 500 Momentum 50 Index in the same proportion/weightage with an aim to provide returns before expenses that track the total return of Nifty 500 Momentum 50 Index, subject to tracking errors. However, there can be no assurance or guarantee that the investment objective of the scheme will be achieved.

Investment Strategy:

The Groww Nifty 500 Momentum 50 ETF will be managed passively with investments in stocks in the same proportion as in the Nifty 500 Momentum 50 Index. The investment strategy of the Scheme will be to invest in a basket of securities forming part of Nifty 500 Momentum 50 Index in similar weight proportion. The investment strategy would revolve around reducing the tracking error to the least possible through regular rebalancing of the portfolio, considering the change in weights of stocks in the Index as well as the incremental collections/redemptions in the Scheme. A part of the funds may be invested in debt and money market instruments, to meet the liquidity requirements. Subject to the Regulations and the applicable guidelines the Scheme may invest in the schemes of Mutual Funds. The investment strategy shall be in line with the asset allocation  Though every endeavour will be made to achieve the objective of the Scheme, the AMC/Sponsors/Trustee does not guarantee that the investment objective of the Scheme will be achieved. No guaranteed returns are
being offered under the Scheme.

Derivative products are leveraged instruments and can provide disproportionate gains as well as disproportionate losses to the investor. Execution of such strategies depends upon the ability of the fund manager to identify such opportunities. Identification and execution of the strategies to be pursued by the fund manager involve uncertainty and decision of fund manager may not always be profitable. No assurance can be given that the fund manager will be able to identify or execute such strategies. The risks associated with the use of derivatives are different from or possibly greater than, the risks associated with investing directly in securities and other traditional investments.

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Risk Associated with the Groww Nifty 500 Momentum 50 ETF – Direct (G)

The Scheme will invest atleast 95% of its net assets in Constituents of Nifty 500 Momentum 50 Index. The Scheme is sectoral in nature, hence will be affected by the risks associated with the constituents of Nifty 500 Momentum 50 Index. Performance of the underlying index will have a direct bearing on the performance of the scheme. The extent of the Tracking error may have an impact on the performance of the scheme.

Tracking error means the extent to which the NAV of the fund moves in a manner inconsistent with the movements of the benchmark index on any given day or over any given period of time due to any cause or reason whatsoever including but not limited to expenditure incurred by the scheme, IDCW payouts if any, whole cash not invested at all times as it may keep a portion of funds in cash to meet redemption etc. The tracking error i.e. the annualized standard deviation of the difference in daily returns between the underlying index or goods and the NAV of the Scheme based on daily past one year rolling data shall not exceed 2%. In case of unavoidable circumstances in the nature of force majeure, which are beyond the control of the AMCs, the tracking error may exceed 2% and the same shall be brought to the notice of Trustees with corrective actions taken by the AMC, if any. However, the Fund will endeavour to limit the tracking error within 2% limits. Tracking difference is the difference of return between the scheme and benchmark annualized over 1 year, 3 year, 5 years, 10 years and since inception period.

Tracking error/ difference could be the result of a variety of factors including but not limited to:
• Delay in the purchase or sale of stocks within the benchmark due to o Illiquidity in the stocks, circuit filters on
the stocks

• Delay in realisation of sale proceeds

• The scheme may buy or sell the stocks comprising the index at different points of time during the trading sessionat the then prevailing prices which may not correspond to its closing prices.

• Index providers may either exclude or include new scrips in their periodic review of the stocks that constitute the  underlying index. In such situations the scheme will endeavour to rebalance the portfolio in line with the index. But may not able to mirror the index immediately due the available investment/reinvestment opportunity.

• The holding of a cash position and accrued income prior to distribution of income and payment of accrued
expenses.

• Disinvestments to meet redemptions, recurring expenses, payouts of IDCW etc.

• Execution of large buy / sell orders

• Delay in credit of securities

• Transaction cost and recurring expenses

• Delay in realisation of Unit holders’ funds

• Levy of margins by exchanges 

What are the Risk Mitigtion Strategies of Groww Nifty 500 Momentum 50 ETF – Direct (G)

ETF Scheme being a passive investment carries lesser risk as compared to active fund management. The portfolio follows the index and therefore the level of stock concentration in the portfolio and its volatility would be the same as that of the index, subject to tracking error. Thus there is no additional element of volatility or stock concentration on account of fund manager decisions.  

As per data from NSE more than half of market liquidity remains in the index. Therefore, the scheme does not envisage liquidity issues. The scheme may take exposure to equity derivatives of the index itself or its constituent stocks, when equity shares are unavailable, insufficient or for rebalancing in case of corporate actions for a temporary period.