Motilal Oswal Mutual Fund is launching the Nifty MidSmall Financial Services Index Fund, an open-ended scheme tracking the Nifty MidSmall Financial Services Total Return Index. Opening on October 29, 2024, this New Fund Offer (NFO) offers investors a chance to gain exposure to mid and small-cap companies within India’s financial services sector.
This fund seeks to replicate the performance of a diverse set of financial services stocks, providing investors an opportunity to benefit from the growth of emerging financial firms that are making an impact across underserved and rapidly expanding markets in India.
Key Features
- NFO Period: Opens on October 29, 2024
- Fund Managers: Swapnil Mayekar (Equity) and Rakesh Shetty (Debt)
- Benchmark: Nifty MidSmall Financial Services Total Return Index
- Minimum Investment: ₹500 initially, with ₹1 increments thereafter
- Exit Load: 1% if redeemed within 15 days; no load after 15 days
- Sector Focus: 100% in financial services, ensuring targeted exposure
Investment Strategy
The fund passively tracks the Nifty MidSmall Financial Services Total Return Index, which includes mid and small-cap companies across the financial sector. This allows investors to gain exposure to segments like digital finance, fintech innovations, insurance, wealth management, and financial inclusion, focusing on firms that are shaping the future of financial services in India.
Portfolio Highlights
The top ten holdings in the index include a mix of established and emerging financial services companies, such as PB Fintech Ltd. (6.9%), BSE Ltd. (6.7%), Federal Bank Ltd. (6.5%), and HDFC Asset Management Company Ltd. (5.8%). Other key players include Yes Bank Ltd. (5.7%), AU Small Finance Bank Ltd. (5.6%), Sundaram Finance Ltd. (4.8%), IDFC First Bank (4.5%) and Max Financial Services Ltd. (4.0%), offering investors diversified exposure to companies driving growth and innovation in financial services.
Historical Performance
The Nifty MidSmall Financial Services Index has shown strong recent returns, with a 1-year return of 39.5% and moderate volatility at 20.8%. Over 3 to 5 years, returns remain solid at 24.8% and 19.9% respectively, though volatility increases slightly. For longer terms, the index maintains steady growth with 10-year returns at 12.9% and 15-year returns at 14.7%, reflecting stable performance with manageable risk, making it an appealing choice for long-term investors in the financial services sector.
These returns highlight the growth potential within the mid-small cap financial services space, though they come with moderate levels of volatility, making the fund well-suited for long-term investors with a tolerance for market fluctuations.
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Benefits
The Motilal Oswal Nifty MidSmall Financial Services Index Fund offers targeted growth exposure by focusing on mid and small-cap companies within the financial services sector, which are well-positioned to benefit from emerging trends such as financial inclusion, digitalization, and fintech innovation. These companies have historically shown strong returns, reflecting the high growth potential within this sector as they continue to capture market share and drive advancements. As a passive, index-tracking fund, it also provides a low-cost and transparent way for investors to gain sector-specific exposure, making it an efficient choice for those seeking to invest in the evolving financial landscape of India.
Risks
The sector-specific and mid-small cap concentration means the fund may experience periods of volatility, especially during economic downturns impacting the financial services industry. It is ideal for investors with a high-risk tolerance and a long-term investment horizon.
Conclusion
The Motilal Oswal Nifty MidSmall Financial Services Index Fund offers a unique investment opportunity for those looking to capitalize on India’s evolving financial services landscape through a diversified, mid-small cap portfolio. Suitable for long-term investors seeking growth in financial services, this fund provides exposure to high-potential companies at the forefront of financial innovation. Investors should consult a financial advisor to assess if this fund aligns with their risk profile and investment goals.
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