Edelweiss BSE Internet Economy Index Fund NFO review

Edelweiss BSE Internet Economy Index Fund , a thematic passive fund, will aim to ride the country's expanding digital landscape by tracking the BSE Internet Economy Total Return Index (TRI).

The new fund offer (NFO) opened for subscription on April 25 and will remain open until May 9.

The minimum investment starts at Rs 100 and redemptions within 30 days attract a 0.1 per cent exit load. From a taxation standpoint, the fund is treated as an equity-oriented scheme.

What is the BSE Internet Economy Index?

Launched in October 2024, the BSE Internet Economy Index is built to capture businesses that are deeply embedded in internet-driven operations.

It comprises 20 companies drawn from the BSE 500, selected based on their six-month average free-float market capitalisation.

The index has a ceiling for having no more than three companies from a sub-industry with no individual stock exceeding 15 per cent weight at the time of quarterly rebalancing.

That said, as of March 31, 2025, the top five stocks—Bharti Airtel, Zomato, Info Edge, PB Fintech and MCX—together account for over 50 per cent of the index's weight. The index is also skewed toward just three sectors: consumer discretionary (39.5 per cent), financial services (37.5 per cent) and telecommunications (23.1 per cent).

How has the index performed so far?

As per the March-end factsheet of the index, the BSE Internet Economy Index TRI has returned 17.9 per cent, 18.8 per cent and 36.6 per cent over the last one, three and five years, respectively. Its 10-year return stands at 10.3 per cent. While Internet Economy Index has outpaced the BSE 500 TRI (broader market index) and BSE Teck TRI (index constituting stocks from media and publishing, IT and telecommunications) over the 1,3 and 5-year period, it trails behind both on a 10-year basis.

What you should know

Sectoral and thematic funds like this new fund tend to be more volatile than diversified equity funds.

Their concentrated portfolios and narrow focus often lead to sharper swings—both upward and downward—depending on how the theme plays out in the market.

On valuations, the index P/E ratio has moderated over the past six months—from 115.6 to 64.0—but it remains at 64, against 23.4 of the BSE 500 TRI as of March 31, 2025. Meaning, these stocks seem to be at the pricier end.

Moreover, some of its top constituents like Bharti Airtel, Zomato, Info Edge, PB Fintech and MCX surged significantly over the past year. The sharp run-ups raise questions about how much of the near-term growth is already priced in.

This index fund has one interesting proposition, though, and that is its unique composition. Stocks like Tata Communications (4.1 per cent presence in the index), CAMS (3.9 per cent), Bharti Hexacom (2.4 per cent), etc., are not usually present in an average flexi-cap fund .

Our take

The combination of a small number of stocks, sector concentration and premium valuations makes Edelweiss BSE Internet Economy Index Fund a high-risk, high-reward option. If you believe in the theme and can withstand the volatility that comes with it, consider investing a small portion (maybe 5 per cent of your money)—and only with a long-term view.

For the bulk of your equity investments, though, diversified index funds like flexi-cap or multi-cap schemes remain the smarter pick and should be part of your core portfolio.

Also read: Ask these three questions before investing in an NFO