Motilal Oswal Mutual Fund is set to launch its latest open-ended index fund, the Motilal Oswal Nifty MidSmall IT and Telecom Index Fund. This new fund aims to replicate the performance of the Nifty MidSmall IT and Telecom Total Return Index by investing in a carefully selected pool of mid and small-cap stocks in the IT and telecom sectors. The fund opens for subscription on October 29, 2024.
This index fund leverages the growth potential of the mid and small-cap segments within the tech and telecom industries, aligning with trends in data analytics, artificial intelligence, cloud services, telecom equipment, and the much-anticipated 5G rollout. Here’s a closer look at what makes this fund an appealing option for investors:
Key Features
- NFO Period: Opens on October 29, 2024
- Fund Manager: Managed by Mr. Swapnil Mayekar (Equity) and Mr. Rakesh Shetty (Debt)
- Benchmark: Nifty MidSmall IT and Telecom Total Return Index
- Minimum Investment: ₹500 initially, and increments of ₹1 thereafter
- Exit Load: 1% if redeemed within 15 days; no exit load after 15 days
- Sectoral Focus: Information Technology and Telecommunications sectors
Investment Strategy
This fund passively tracks the Nifty MidSmall IT and Telecom Total Return Index, which is highly concentrated in the IT (70.7%) and telecom (29.3%) sectors. The fund’s objective is to provide returns that mirror the underlying index, aiming to capture sector-specific growth opportunities by following a strict, non-discretionary investment approach.
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Sector and Stock Highlights
The top ten holdings of the Motilal Oswal Nifty MidSmall IT and Telecom Index Fund emphasize mid and small-cap leaders in IT and telecom, with Persistent Systems Ltd. (13.2%) and Indus Towers Ltd. (11.1%) leading the way. Other key players include Coforge Ltd. (10.6%), Mphasis Ltd. (7.7%), and Oracle Financial Services Software Ltd. (6.2%), each contributing robust digital and software solutions. Tata Elxsi, KPIT Technologies, Tata Communications, Vodafone Idea, and Cyient round out the portfolio, highlighting a balanced mix of tech and telecom stocks aimed at capturing growth from digital transformation and infrastructure advancements.
This concentration on established mid-small players allows investors to gain exposure to stocks on a rapid growth trajectory within the IT and telecom spaces.
Historical Performance
The Nifty MidSmall IT and Telecom Index shows robust annualized returns, particularly over 1 year (36.9%) and 5 years (41.4%), albeit with higher volatility (20.4% to 23.6%) reflecting sector momentum. Long-term returns moderate to 22.0% over 10 years and 15.7% over 15 years, with stable volatility around 20%, indicating steady growth potential for those with a tolerance for risk in the tech and telecom sectors.
These historical returns underscore the benefits of sustained investment in the sectors covered by this index, though it’s essential to note that past performance is not indicative of future returns.
Benefits
- Sectoral Expertise: Focus on rapidly evolving IT and telecom industries with exposure to mid-small cap innovation.
- Potential for High Growth: Positioned in industries where digital transformation and connectivity advancements offer long-term growth.
- Low Cost and Transparency: Index funds typically have lower fees, and this fund’s passive management provides a transparent approach to sector investing.
Risk Considerations
The fund’s high sector concentration means it may experience volatility, especially in fluctuating market conditions impacting tech and telecom sectors. This fund is suitable for investors with a high-risk tolerance and a long-term investment horizon, looking to capitalize on sectoral trends.
Conclusion
For investors seeking exposure to mid and small-cap growth stories within the tech and telecom sectors, the Motilal Oswal Nifty MidSmall IT and Telecom Index Fund presents an attractive opportunity. By passively following the Nifty MidSmall IT and Telecom Total Return Index, this fund is well-suited for those aiming to benefit from industry advancements like AI, cloud computing, and the expansion of 5G networks.
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