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Two more AMCs launch Nifty 100 index funds

HDFC Mutual Fund and IDFC Mutual Fund have come up with their Nifty 100 index funds, thereby adding another fund to their passive bouquet

Two more AMCs launch Nifty 100 index funds

The mutual fund industry has recently seen a mad rush of passive funds. Since the start of this year, the mutual fund industry has seen the launch of 23 passive funds in ETF, index and FoF formats across various categories and asset classes. Joining the bandwagon are HDFC Nifty 100 Index Fund and IDFC Nifty 100 Index Fund.

These new index funds in the large-cap space will track the Nifty 100 TRI. The Nifty 100 index consists of the 100 largest companies by market capitalisation reflecting the overall market conditions. Both the HDFC Nifty 100 Index Fund and IDFC Nifty 100 Index Fund will close for subscription on February 18, 2022.

Two more AMCs launch Nifty 100 index funds

About the strategy
By tracking the Nifty 100 TRI, these funds will allow an investor to invest in the large-cap companies (top 100 companies based on market capitalisation). The Nifty 100 tracks the behaviour of a combined portfolio of two indices, viz., Nifty 50 and Nifty Next 50.

Comparing the three indices allocation to top-5 and top-10 stocks, we see that the Nifty 50 index and Nifty 100 index are more closely aligned in their composition. Moreover, the Nifty Next 50 index offers greater diversification among more stocks than the Nifty 50 and Nifty 100 index. In terms of sector diversification, the Nifty 50 and Nifty 100 index seem to tilt towards Financial services, IT, Oil & Gas and Consumer goods.

About the performance
To understand how the Nifty 100 stacks up over a longer investment horizon with its more popular peers, the Nifty 50 TRI and Nifty Next 50 TRI, we compared the 5-year rolling returns of the indices (see 'Performance comparison'). We observe that owing to similar portfolio composition, the returns of Nifty 50 TRI and Nifty 100 TRI are closely aligned. The Nifty Next 50 TRI has managed to outperform both the indices till 2020, however, the trend seems to have reversed since the second half of 2020 as the Nifty 50 and Nifty 100 indices have been outperforming the Nifty Next 50 TRI. But these are historical trends, and one cannot extrapolate them to the future.

Currently, just four more funds track the Nifty 100 TRI. Out of these, three are ETFs and one is an index fund, the oldest of which is Nippon India ETF Nifty 100 which has been in existence since March 2013.

Two more AMCs launch Nifty 100 index funds

About the AMC
As of December, 2021, HDFC Mutual Fund manages assets worth over Rs 4.31 lakh crore across 49 open-end mutual fund schemes while IDFC Mutual Fund manages assets worth over Rs 1.20 lakh crore across 39 open-end mutual fund schemes.

HDFC Mutual Fund has a wide bouquet of 22 open-end equity schemes across categories that together make over Rs 1.36 lakh crore worth of assets. Apart from the newly launched index fund, the fund house currently has seven more index funds and ETFs.

The relatively smaller fund house, IDFC Mutual Fund has 13 open-end equity schemes across categories that together make over Rs 22,500 crore worth of assets. Apart from the newly launched index fund, the fund house currently has three more index funds and ETFs.