Nippon India Launches Quality-Driven Nifty 500 Index Fund — A New Passive Bet on India’s Elite 50

Nippon India Nifty 500 Quality 50 Index Fund is an open-ended index fund that aims to replicate the performance of the Nifty 500 Quality 50 Index, subject to tracking errors. The scheme seeks to provide returns that closely align with the total returns of the benchmark index before expenses. It offers high liquidity with daily redemption and switch-in/switch-out facilities, and redemption proceeds are processed within 3 working days. The scheme is not listed on any exchange as of now. NAVs are declared daily and available on the AMC and AMFI websites. It offers both Growth and Income Distribution cum Capital Withdrawal (IDCW) options under Regular and Direct Plans. IDCW payouts are made within 7 working days from the record date.

Key features: Nippon India Nifty 500 Quality 50 Index Fund – Direct (G)

Investment Objective 

The investment objective of the scheme is to provide investment returns that commensurate to the total returns of the securities as represented by the Nifty 500 Quality 50 Index before expenses, subject to tracking errors. However, there is no assurance that the investment objective of the Scheme will be achieved.

What are the investment strategies of this NFO?

• The Nippon India Nifty 500 Quality 50 Index Fund is a passively managed index fund designed to mirror the performance of the Nifty 500 Quality 50 Index.
• The scheme aims to invest at least 95% of its assets in the exact constituents of the index, maintaining the same stock weights as the benchmark. Rather than making discretionary decisions, the fund manager follows a replication strategy, adjusting the portfolio only when the index itself changes.
• This disciplined, rules-based investing removes human bias and seeks to minimize tracking errors. Additionally, the scheme may temporarily allocate funds to money market instruments to meet liquidity needs or rebalance the portfolio after corporate actions.
• Derivatives may also be employed for hedging or efficient portfolio management, but within regulatory limits. Overall, the strategy is designed to offer stable, long-term returns that align with the index, without the unpredictability of active stock picking.

Check out other upcoming NFOs

What are the risks associated with this NFO?

• Despite being a passive fund, the Nippon India Nifty 500 Quality 50 Index Fund carries market risks, especially since it invests in equities, which are inherently volatile.
• The biggest risk is tracking error, which occurs when the fund's performance diverges from the benchmark due to factors like cash holdings, corporate actions, or rebalancing delays. Since the portfolio mirrors the index composition, any underperformance or sectoral bias in the index will directly affect the fund.
• There's also a possibility of the fund being exposed to illiquid or unlisted securities due to unforeseen corporate actions. The use of derivatives introduces leverage risk, which can magnify losses.
• Additionally, since the fund abstains from voting in corporate matters (being a passive fund), it might miss opportunities to influence decisions that could impact performance. Overall, the risk is lower compared to actively managed funds but not negligible.

What does the fund offer?

• The Nippon India Nifty 500 Quality 50 Index Fund offers cost-efficient exposure to 50 high-quality companies selected from the Nifty 500 universe, based on parameters like high return on equity, stable earnings, and low debt.
• With both Direct and Regular plans and Growth and IDCW options, it caters to varied investor preferences. Being an open-ended scheme, it allows daily purchase, redemption, and switches, offering flexibility and liquidity.
• NAVs are updated daily on the AMC and AMFI websites. Managed by Mr. Jitendra Tolani, this fund targets investors looking for long-term wealth creation through disciplined investing without relying on active fund manager decisions.
• Since the fund closely tracks the Nifty 500 Quality 50 TRI, investors benefit from a diversified and fundamentally strong portfolio. The fund also promises zero entry or exit load, enhancing cost efficiency further.

This NFO is for what kind of investor?

Ideal for long-term, passive investors seeking exposure to fundamentally strong companies with a low-cost, diversified, and rules-based investment strategy.