Investors who want to invest in the tradeable units of mutual funds can explore exchange traded funds. With the launch of two new exchange traded funds (ETFs) lately, the investment universe has expanded a bit.
HDFC Mutual Fund launched a new fund offer for Nifty Private Bank ETF and Nifty IT ETF. These two schemes opened for subscription last week and will remain so until November 9.
These fund schemes are meant for investors who are seeking returns that are commensurate with the performance of the underlying index (TRI) (Nifty Private Bank index, Nifty IT index) over long term.
About the rationale of investing in exchange traded funds (ETF), the AMC invokes their simplicity, liquidity and diversification.
The asset allocation of the scheme's portfolio will include anywhere between 95 to 100 percent of securities covered by the underlying index, while the remaining 0-5 percent would be debt securities and money market instruments, units of debt schemes of mutual funds.
About HDFC Nifty IT ETF: It consists of the 10 largest IT stocks listed on the NSE which are Infosys, TCS, HCL Technologies, Wipro, Tech Mahindra, L&T Infotech, Mphasis, Persistent Systems, Coforge and L&T Tech Services. Stocks are capped at 33 percent each while the top 3 stocks are capped at 62 percent in aggregate.
About Nifty private bank index: It consists of the 10 largest and most liquid private bank stocks which are ICICI Bank, HDFC Bank, IndusInd Bank, Kotak Mahindra Bank, Axis Bank, Federal Bank, Bandhan Bank, IDFC First Bank, City Union Bank and RBL Bank. Each stock is capped at 33 percent and the top three stocks are capped at 62 percent in total.
The benchmark of HDFC Nifty IT ETF will be Nifty IT index and that of HDFC Nifty Private Bank ETF will be Nifty Private Bank index. Fund managers of the fund schemes will be Krishan Kumar Daga and Arun Agarwal.
The minimum application amount during ongoing offer will be ₹500 per application and in multiples of Re 1 thereafter.
It is worth noting that HDFC Mutual Fund launched a silver ETF fund of fund in the first week of October following the launch of HDFC silver ETF in the month of August.