Reliance Industries Limited (RIL), the largest constituent of S&P CNX Nifty index with a weightage 11 per cent, has not found much of a favour with the fund manager of Motilal Oswal’s MOSt Shares M50 exchange-traded fund (ETF).
MOSt Shares M50 has assigned the country’s largest private sector company a weightage of just about 0.54 per cent in its portfolio. Infosys, which has a weightage of 8.63 per cent in Nifty, constitutes 3.74 per cent of MOSt Shares M50’s portfolio. The ETF, which was listed on the National Stock Exchange (NSE) on July 30 2010, seeks to replicate the performance (before fee and expense) of MOSt 50 Basket, a fundamentally weighted basket based on S&P CNX Nifty Index. Nifty is the 50-share index of NSE.
Weightage of a stock in MOSt 50 basket is determined by using Motilal Oswal AMC’s pre-defined methodology that assigns weights based on stock's fundamentals such as net worth, share price, retained earnings and return on equity (RoE).
Rajnish Rastogi, fund manager, MOSt Shares M50 ETF, told Value Research, said that shares of RIL are too expensive at the moment and the company (RIL) is not expected to perform very good in the immediate future. “Therefore, RIL constitutes a small portion of the fund’s portfolio,” he said.
According to Rastogi, stocks is the basket are classified in three categories – first, stocks that are cheap and have strong fundamentals, second, stocks that are cheap but have reasonable fundamentals, third, slightly expensive but fundamentally strong and fourth, expensive and relatively weak on performance. “Stocks in the first category get the highest weightage while those in the last category get the least allocation,” he said.
IDFC gets the maximum weightage in the portfolio with 7.35 per cent allocation, followed by BHEL (6.54 per cent), Hindalco Industries (5.92 per cent), Tata Motors (5.06 per cent) and Reliance Capital (4.71 per cent)
The fund will not invest more than 8 per cent of the portfolio in a single stock.
“About 30 stocks constitute 20 per cent of the portfolio while the other 20 stocks constitute 80 per cent of the portfolio,” Rastogi said.
Among sectors, allocation to financial sector is highest with 29.2 per cent portfolio invested in stocks of the sector. Energy (16.49 per cent), automobile (13.20 per cent) and metals (10.22 per cent) are the other major sectors occupying the portfolio.
Weightage of stock in MOSt 50 basket would be readjusted as and when there is a change in constituents of Nifty or one year from last change, whichever happens earlier.
The price of MOSt Shares M50 ETFs
For all the investment applications received during the NFO period, MOSt Shares M50 units will be allotted to investors at a price approximately equal to 1/100th of the value of MOSt 50 Basket on the allotment date. On August 5, MOSt 50 Basket was at 7,863 points.
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