SBI Mutual Fund Launches Nifty 500 Index Fund; Know Why You Should Invest?
SBI Mutual Fund has launched its latest offering in the form of the SBI Nifty 500 Index Fund. This would be an open-ended plan for tracking the Nifty 500 Index and would, therefore, provide an open window to diversification through broad Indian companies. The NFO period is from September 17 to September 24, 2024.
What is the Nifty 500 Index?
The Nifty 500 Index consists of the largest 500 listed companies in India measured by market capitalization, representing large-cap, mid-cap and small-cap segments. It offers a comprehensive view of the Indian equity market, accounting for approximately 92.1% of the total market capitalization of all listed companies on the NSE, as of March 2024.
Features of the SBI Nifty 500 Index Fund
SBI Nifty 500 Index Fund will replicate the Nifty 500 Index performance by investing in the same companies that constitute the Nifty 500 Index. Being a passively managed fund, it does not require active stock picking or market timing and hence is suitable for those who can take a backseat to management during their investment.
This fund would well suit the pocket of moderate risk tolerance investors as it has large, mid-cap, and small-cap companies. Even though it offers growth potential, there is a higher degree of risk compared with funds that exclusively focus on large-cap stocks.
Why Invest?
- Diversification: The fund provides access to a wide variety of Indian companies cutting across market segments and sectors.
- Low Cost: Being an index fund, management is basically passive, so it would have management fees substantially lower than actively managed funds.
- Transparency: Since the portfolio of the public fund is simple and transparent, investors can easily keep track of its holdings.
Key Information about the NFO
The SBI Nifty 500 Index Fund has two plans: Regular and Direct (the latter coming with lower fees). There is also an option to avail between Growth, wherein the income earned is automatically reinvested, and Income, wherein regular payouts are made. The fund carries an exit load of 0.25% for redemptions within 15 days of allotment, while no charges apply after the 15-day period.
This fund invests at least 95% to 100% of the assets in companies included in the Nifty 500 Index. The rest of the balance is invested in government securities or any similar instrument. The minimum investment in the scheme shall start at Rs.5,000 and subsequent investments in the scheme can be made through SIPs on a daily, weekly, monthly, or other frequency.
This fund aligns its returns with that of the Nifty 500 Index. There is no guarantee of achieving this benchmark.
How does it differ from Nifty 50?
Although the Nifty 50 Index is inclined towards large-cap companies, which provide stability and reliable dividends, this Nifty 500 Index Fund offers broader market exposure. This fund has included 400 mid and small-cap companies that are known for possibly offering higher growth chances but with high risks as well. The Nifty 500 is weighted more toward the large-cap companies, although the presence of some smaller companies does add a volatile element to it.
Who should Invest in it?
It is ideal for long-term investors who are looking for diversification and capital growth. On the other hand, a mid to small-cap stock fund requires a high-risk tolerance, as their values tend to fluctuate more than that of large-cap stocks. Therefore, for someone initiating an investment in the equity market, it would do well to begin with relatively small investments while gradually increasing their exposure as they get accustomed to the associated risks and rewards.
The fund allows investors to invest in a wide range of companies established as large-cap firms, midcap-growth potential, and emerging small-cap businesses. It offers multicap exposure through one, passively managed index fund, making it convenient for market exposure at a relatively lower cost.
