SBI Mutual Fund on Wednesday launched the Nifty Next 50 Index Fund, an open-ended index scheme that would replicate the performance of the Nifty Next 50 Index.
The scheme, which will close on 11 May, will invest 95-100% in securities covered by the Nifty Next 50 Index with up to 5% in money market instruments and units of liquid mutual funds. The objective of the scheme is to provide returns that closely correspond to the total returns of the securities as represented by the underlying index.
Vinay Tonse, managing director and chief executive officer, SBI Mutual Fund, said: “SBI Nifty Next 50 Index Fund is a good opportunity for those who want to take advantage of the merits of passive investing and at the same time benefit from the growth potential of future market leaders which comprise the underlying index.”
The Nifty Next 50 Index was launched on 24 December 1996. The index represents 50 companies from Nifty 100 after excluding the constituents of Nifty 50.
Over the past one year, the index has delivered a gain of around 50%.
The fund manager for SBI Nifty Next 50 Index Fund would be Raviprakash Sharma, who also manages the SBI Nifty Index Fund and other exchange-traded funds.
The minimum application amount required is ₹5,000 and in multiples of ₹1 thereafter. Investments can also be done through daily, weekly, monthly, quarterly, semi-annual and annual systematic investment plans (SIPs).
“SBI’s new fund is not new in the market as other mutual fund houses already have such plans. But the Nifty Next 50 Fund is a very promising index as it has performed well in the past. SBI MF is now filling the gap in its portfolio by launching this fund. These are good index funds, which the people should be holding,” said Srikanth Meenakshi, co-founder, PrimeInvestor, a mutual fund research portal.
ICICI Prudential Mutual Fund and UTI Mutual Fund have one of the biggest Nifty Next 50 funds with assets under management worth ₹1,000 crore and ₹900 crore, respectively.
On the Nifty Next 50 funds available in the market, Rishad Manekia, a Sebi-registered investment adviser, and founder and managing director of Kairos Capital, a wealth management firm, said that these funds should form a part of an investor’s portfolio.
“Data show that in the top Nifty stocks, passive indices are meeting the performance of active mutual funds. So, going by a passive route is a good option,” said Manekia.
However, he suggested that investors should wait until a fund gets established and creates a track record.
Investors should note that as SBI MF’s Nifty Next 50 Index Fund is an equity fund, it carries high risk.
They should allocate to these funds based on their risk profile and asset allocation.