NFOs review: Tata launches six sectoral and thematic funds. Should you invest in them?

Fund houses have been raining investors with sectoral and thematic funds lately. This is primarily due to SEBI's (Securities and Exchange Board of India) regulations that have limited AMCs to launch only one fund per category. However, this does not apply to sectoral and passively managed funds. Thus, fund houses that already have funds in core categories are now launching NFOs (new fund offers) which either replicate a particular index or focus on a particular sector. In line with this trend, Tata Asset Management Company (AMC) recently launched six new passively managed sectoral and thematic fund offers. Subscriptions to these schemes opened on April 8, 2024, and will remain available until April 22, 2024. These NFOs will target the automobile, financial services, healthcare, infrastructure, manufacturing and real estate sectors. Further, they are passive funds that will replicate their respective indices. Here are some key details about these funds. Which indices will these funds replicate? Below are some key details about the indices that the NFOs will aim to replicate. Tata Nifty MidSmall Healthcare Index Fund Benchmark Nifty MidSmall Healthcare Index (TRI) Comparable index Nifty Healthcare Index returns About the index It selects 30 healthcare stocks from 400 companies in the Nifty 500, which are based on free-float market capitalisation. The index's composition will be rebalanced twice a year, with quarterly adjustments. Incumbent funds? While this would be the first fund to track mid- and small-cap stocks specifically from the healthcare universe, five existing ETFs (exchange-traded funds) already replicate the broader healthcare index. Performance of the index (%) 3-yr: 11.3, 5-yr: 10.3, 10-yr: 7.1 Performance of the comparable index (%) 3-yr: 15.9, 5-yr: 17.9, 10-yr: 11.2 Tata Nifty 500 Multicap India Manufacturing 50:30:20 Index Fund Benchmark Nifty 500 Multicap Manufacturing 50:30:20 Index (TRI) Comparable index Nifty India Manufacturing Index returns About the index It includes 75 manufacturing stocks from the Nifty 500 universe, which comprises 15 large-cap, 25 mid