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NFO review: Axis Nifty 50 Index Fund

Axis Mutual Fund launches an index fund tracking the Nifty 50 TRI. Here are the details.

NFO review: Axis Nifty 50 Index Fund

Axis Mutual Fund has launched a new index fund in the large-cap space that will track the Nifty 50 TRI. Nifty 50 is the most widely tracked Indian equity index and is a barometer for the Indian capital markets. The fund will invest in the top 50 companies based on their market capitalisations.

The scheme will close for subscription on November 29, 2021. It will be managed by Jinesh Gopani, Head-Equity, Axis Mutual Fund.

NFO review: Axis Nifty 50 Index Fund

Chandresh Nigam, MD and CEO of the AMC said, "Axis AMC has believed in offering quality products to investors that suit their risk appetite and needs. Not only do we aim to build a robust product portfolio but hope to deliver consistent performance in every fund that we manage. Axis Nifty 50 Fund's low friction investment strategy that relies on broader market wisdom coupled with the principle of 'quality & growth' philosophy will yield wealth creation opportunities for investors."

About the strategy
The fund's passive strategy seeks to replicate the Nifty 50 Total Return Index by investing in a basket of Nifty 50 Index stocks across 13 categories in the same proportions as their weightings in the index.

The Nifty 50 index comprises top 50 stocks based on the free float market capitalisations across 13 major sectors. The top 10 stocks of the index comprise more than half of the assets, while the top 5 sectors make up roughly 83 per cent of the portfolio (see graph: 'Nifty 50 index composition').

It must be noted that the index is market-cap based and thus, both these allocations would undergo a change as the market cap of its constituent companies change, whenever they undergo re-balancing, i.e., about twice a year.

The fund house had previously launched an ETF - Axis Nifty ETF, on the same theme in 2017. With this NFO, the AMC seeks to cater to those investors who don't own a demat account and hence might prefer the index fund route of investing. Moreover, the fund house also has another large-cap index fund tracking the Nifty 100 index and hence covering the entire large-cap space.

About the performance
There has been a growing interest in passive funds especially in the large-cap space as several actively-managed large-cap funds are finding it difficult to beat the Nifty 50 Index (see table 'Performance comparison').

About the AMC
As on October, 2021, Axis Mutual Fund manages assets worth over Rs 2.51 lakh crore across 54 schemes making it the seventh largest fund house based on the assets managed by it. Of this, Rs 2.49 lakh crore is made up of the open-end funds.

When it comes to the passive line-up of the AMC, it is a far cry from the kind of money it manages in the active space. The fund house currently manages 8 index funds/ETFs that collectively manage assets worth over about Rs 1,700 crore.

Most of these passive funds offered by the fund house are fairly new, so they don't have a pretty long track record. The fund where sufficient history is available - Axis Nifty ETF, the AMC has been doing a fair job, given its modest tracking error as against that of other ETFs tracking the same index.