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It's raining new fund offers (NFOs) at Motilal Oswal AMC . This year alone, it introduced 12 NFOs, which raised a staggering Rs 5,731 crore (excluding Motilal Oswal Digital India Fund ). And now, the fund house seems to have extended this streak with the launch of not one but four new passively managed sectoral and thematic funds.
Subscriptions to these schemes opened on October 29, 2024, and will remain available until November 6, 2024. These NFOs will target the mid- and small-cap companies in the Financial Services, Healthcare, IT, Telecom and Consumption sectors. They will invest in stocks from the Nifty 400 universe, which includes companies under the Nifty Midcap 150 and Nifty Smallcap 250 indices. Barring the Healthcare fund, the rest three funds will be one of a kind.
Being index funds, they will mirror their respective indices, investing in the same companies and proportions. For instance, if Company A holds 5 per cent of the index, the fund will also allocate 5 per cent to it.
Below are the key details of these funds.
Motilal Oswal Nifty MidSmall Financial Service Index Fund
| Category | Sectoral (Index) |
| Benchmark | Nifty MidSmall Financial Services TRI |
| Portfolio composition | The index holds 30 stocks versus 20 in the Nifty Financial Services Index. Nearly 50 per cent of its weight lies in the top 10 stocks, with no overlap in the top holdings between the two indices. |
| How has the index performed in the past? | From October 2019 to 2024, it lagged behind the Nifty 400 TRI on a five-year daily rolling basis. It outperformed the Nifty Financial Services TRI only 11 per cent of the time. The most recent outperformance came in September 2023, primarily due to the absence of large-cap private banks, which have underperformed. |
Motilal Oswal Nifty MidSmall Healthcare Index Fund
| Category | Sectoral (Index) |
| Benchmark | Nifty MidSmall Healthcare TRI |
| Portfolio composition |
The index's top 10 stocks constitute around 60 per cent of the portfolio. By contrast, the Nifty Healthcare Index is highly concentrated, with 82 per cent of the portfolio formed by the top 10 stocks.
There's roughly a one-fifth overlap in the top 10 holdings between the two indices. |
| How has the index performed in the past? |
From October 2019 to 2024, the index has demonstrated strong performance, consistently outperforming the Nifty Healthcare TRI on a five-year daily rolling basis and beating the Nifty 400 TRI 75 per cent of the time. This performance stems from a more diversified mix across 46 healthcare companies, including pharma, hospitals, and API manufacturing. Notably, 38 of these are mid- and small-cap firms.
However, the index has started to underperform the NIFTY 400 TRI since last year. |
Motilal Oswal Nifty MidSmall IT and Telecom Index Fund
| Category | Sectoral (Index) |
| Benchmark | Nifty MidSmall IT and Telecom TRI |
| Portfolio composition | The index holds 20 stocks, of which the top 10 constitute 76 per cent of its weight. The Nifty IT Index, in comparison, is more concentrated, with a total of just 10 stocks. Three companies are common between the two indices, with about a 14 per cent overlap. |
| How has the index performed in the past? | After a strong 2022, beating the Nifty 400 by around 15 per cent, the index has kept a steady edge of about 9 per cent this drop is due to a rally in other sectors. It's performing better compared to the Nifty IT Index, which mainly has large-cap IT companies. In 2024, it outperformed Nifty IT by 16 per cent on average, compared to just 6 per cent in 2023 and 2 per cent in 2022. This improvement comes as large-cap IT companies face a slowdown due to global economic pressures and the presence of a more diversified mix of stocks in the mid- and small-cap space. |
Motilal Oswal Nifty MidSmall India Consumption Index Fund
| Category | Thematic (Index) |
| Benchmark | Nifty MidSmall India Consumption TRI |
| Portfolio composition |
Healthcare, Consumer Durables and FMCG make up 60 per cent of this index, in contrast to the Nifty India Consumption Index, which prioritises FMCG, Automobiles and Consumer Services. The index doesn't have Automobiles, as it targets small- and mid-cap stocks. Nearly half of the portfolio is in its top 10 holdings, not overlapping with the Nifty Consumption Index. Its stock selection is based on a free-float market cap, while the Nifty India Consumption Index caps each stock at 10 per cent of the portfolio. |
| How has the index performed in the past? |
From October 2019 to 2024, this index has shown cyclical performance, outperforming the Nifty India Consumption TRI 89 per cent of the time and the Nifty 400 TRI 64 per cent of the time on a five-year daily rolling basis. Recently, it has lagged behind the Nifty 400 index due to about 40 per cent allocation to FMCG and Consumer Durables, both impacted by rising input costs and weaker consumer spending. |
Exit load
The exit load will be uniform across all four funds. If you redeem your units on or before 15 days from the date of allotment, an exit fee of 1 per cent of the applicable NAV (net asset value) will be charged.
Tax treatment
If you sell your units within one year of purchase, you will be taxed 20 per cent. And if the units are sold after more than one year, a long-term capital gains tax rate of 12.5 per cent will apply. However, note that any gains of up to Rs 1.25 lakh will be tax-exempt.
Who are the fund managers?
Rakesh Shetty and Swapnil Mayekar will jointly manage the funds. While Mayekar focuses on AMC's passively managed funds, Shetty looks at debt. Together, they bring extensive experience, jointly managing about 11 other funds.
Our take
Though sectoral and thematic NFOs may be all the rage, they are riskier than diversified funds. This is because they provide targeted exposure to specific industries, resulting in highly concentrated portfolios, making these funds more volatile. Instead, you can consider multi-cap and flexi-cap funds , which invest across market caps and sectors.
However, if you're keen on investing in these funds, we suggest allocating only a small portion of your portfolio to them.
Also read: Ask three questions before investing in an NFO
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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