Nippon India Nifty Auto Index Fund NFO: NAV & Returns

Nippon India Nifty Auto Index Fund: Complete Overview

Nippon India Mutual Fund (NIMF) introduced a Nippon India Nifty Auto Index Fund. The goal of this open-ended scheme is to offer investment gains that are in line with the overall investment returns on the securities represented by the Nifty Auto Index, before costs and associated marginal deviations.

The NFO scheme is available for subscriptions from 14 November 2024 and the new fund offer closure date is 28 November 2024. After that, this Mutual Fund Scheme will be available for continuous sale and repurchase on December 10, 2024.

Advantages of Investing in an Index Fund

• Founded to follow an index.

• Open-ended scheme.

• The opportunity for diversification in one unit.

• Typically lower cost is charged to the investor than an actively managed investment fund.

• Performance following the relative benchmark index of the fund (net of management fee and tracking error).

• Clear cut, in as much as the scheme will replicate the index.

 

Why Index Fund?

The reason behind making investments:

• Offers access to the performance of the top 15 automobile stocks which are listed on the NSE Sector Exposure.

• The constituents of the Auto Index comprise - passenger vehicles, 2 wheelers and three-wheelers, trucks and tractors, auto spare parts, tyre manufacturing, and electric vehicles.

• Diversified Constituents

• Reduction of non-systematic risks such as stock management and portfolio manager selection.

• Reduced Risk

• Targeted Portfolio Focus

 

Scheme Plan: The scheme is available in two options Nippon India Nifty Auto Index Fund-Direct and Nippon India Nifty Auto Index Fund-Regular.Today at the Nippon NFO, we're dedicated to providing you with useful information on this new NFO, including financial characteristics and any prior performance. Keep reading to know the details of this new fund offer.

 

Nippon India Mutual Fund Details

• With options under ETF, Index Funds, and Fund of Funds, Nippon India Mutual Fund provides 43 passive schemes.

• Nippon India ETF was one of the largest ETF operators as of August 31, 2024, with an AUM of Rs 1.52 trillion (US$ 18.1 billion) and a market share of 18.3%.

• As of August 2024, the Nippon India ETF has a 52% volume share on the NSE and BSE and a 58% market share for ETF folios.

 

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Fund Overview

The Nippon India Nifty Auto Index Fund NFO minimum subscription amount is Rs.1000 and in multiples of Rs.1 thereof.

Auto Industry Highlights

 

• The automotive industry in India includes the production of all types of motor vehicles including passenger vehicles, commercial vehicles, three-wheeler and two-wheeler vehicles.

• The Indian Automobile sector contributes 7.1% to Indian GDP (2023) and employs a million people in direct and indirect ways.

• In this context, the automobile sector received a cumulative equity FDI inflow of about USD 36.3 billion during the period between April 2000 to March 2024. However, the inflows for the year FY24 stood at USD 1.5 billion which is 5% of the total inflows and forecasts.

 

Auto Manufacturers in India

• In FY24, the Indian automotive manufacturing sector was able to manufacture about 28.4 million vehicles, achieving approximately 10% growth over the previous year.

• For FY24, domestic industry sales (units) grew 12.5% YoY, wherein two-wheelers having the highest share of 76% grew approx. 13% YoY whereas passenger vehicles which had a share of 18% grew at 8.4% YoY.

• Export remains robust at around 4.5 million units annually in FY24 

 

Indian Auto Sector- Growth Drivers

1. Growing Demand

• Car ownership in India stands at 26 cars for every 1,000 Indians (FY24), which is considerably low when compared to developed countries (USA at 504 cars) and also even to developing countries like Russia (351 cars), Mexico (280 cars) and Brazil (276 cars) as well.

• Whereas there are only 160 Two-wheelers 2W per 1,000 inhabitants (FY24) which is low when compared to the country of China (300-350 2W), Thailand (300-320 2W), and also in Vietnam (510-530 2W).

• The demand is anticipated to go up due to increasing income levels, rapid urbanization, favorable population structure, and the growing affluence of the middle class.

2. Policy Support

• PLI Scheme.

• Automotive Mission Plan 2016-26.

• PM E-DRIVE and FAME-2.

3. Investments and Capacity Building

• Fostering the process of localization and decreasing import reliance through various programs like the PLI scheme, Phased Manufacturing Program, Atmanirbhar Bharat, and the Make in India initiative.

• India will gain from the global supply chain de-risking making it a second-option country. Besides this, investments from global companies are on the rise in India.

• Numerous car manufacturers, both domestic and foreign, have expressed or pledged to develop production facilities and grow their production capacities.

 

Indian Auto Industry- Fundamentals and Valuations

 

 

How To Invest In the Scheme After The Closure of the NFO?

If you have missed participating in the NFO and now want to invest in the same Scheme on a continuous basis, then on December 10, 2024, when the Scheme will reopen; you will have the option to participate and invest directly in the Mutual Fund by spending at NAV based price by logging on to your Demat account and search for “Nippon India Nifty Auto Index Fund” or directly with the AMC or simply click the ‘Banner’ below.

The Objective of the Fund

Subject to monitoring faults, the scheme's investment goal is to generate returns that are consistent with the total returns of the securities as represented by the Nifty Auto Index before expenses. Nevertheless, there can be no assurance or guarantee that the scheme's investment goals will be met.

Asset Allocation (% of Total Assets) of the Scheme's portfolio will be as follows:

 

Peers of Nippon India Nifty Auto Index Fund

Since this scheme is a new scheme, hence no comparable data on its past performance against its peers is available.

 

Risk Factors In Such Funds

• All index funds have tracking errors inbuilt into them which may lead the schemes not to be able to generate returns corresponding to the performance of the Nifty Auto Index or any one or more securities constituting / in the Nifty Auto Index due to various reasons.

• The Net Asset Value (NAV) of the units is dependent almost entirely upon the value of the constituent stocks of the indexed benchmark. Therefore, this will respond to changes in the stock market and will lead to alterations in the NAV of the units within the scheme. Also, alterations in the scheme’s NAV might occur as a result of shifting interest rates, changes in the overall economy and politics, and prolonged declines in the market.

• Nippon India Nifty Auto Index Fund is a passively managed variant of an index scheme i.e. amount collected under the scheme is invested in securities of companies comprising the underlying index in the same proportions as their weights in the underlying index. The underlying index may undergo periodic changes as determined by the Index Service Provider. The performance of the scheme is mainly dependent on the performance of the underlying index. The degree of Tracking error might affect the overall return of the scheme.

 

Past Performance of Auto Index Funds

 

Nippon India Nifty Auto Index Fund-Growth Fund Managers:

• Mr. Himanshu Mange.

Conclusion

The Nippon India Nifty Auto Index Fund is a good choice for investors seeking a diversified and low-cost index fund for exposure to the automobile sector. It emphasizes exposure to leading automotive companies, passive investment strategies, and eliminating unsystematic risk, thus providing an easy way to invest in the Nifty Auto Index without active management.

Despite being in its introductory phase, it has the potential to grow in the long term in tandem with the automobile industry in the country. Still, investors should keep in mind the market risks and the risk of tracking errors of the fund.

Disclaimer: This NFO analysis is provided solely for informative reasons and should not be construed as investment advice. This is not a buy or sell recommendation. No investment advice is given. Always conduct research and talk with a financial advisor before investing.