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Today, the consumer is a significant benefactor of total economic growth since India represents the second-largest growth prospect for a consumption economy after China. As salaries rise, family expenditure is likely to shift to discretionary spending, including entertainment, vacation, consumer appliances, and real estate.
Looking at the consumption trend, it is not surprising that mutual fund houses want to introduce something in the consumption space. Recently, Axis mutual fund announced the launch of their new fund dubbed ‘Axis Consumption ETF’. The new fund offerings (NFOs), which started on Monday, August 30, will provide exposure to the consumption theme through a bite-sized exchange-traded fund.
Passive investing’s potential in the Indian financial markets has gained considerable momentum and appears set to continue. Index funds and exchange-traded funds are the two most common vehicles for passive investing. Passive investing is a low-friction investment method that closely tracks a given index. It invests in the same percentage of constituents as the index and eliminates security selection risk by relying on broader market intelligence.
Fund strategy
The new fund focuses on long-term wealth creation by investing in a NIFTY India Consumption Index stocks portfolio. The NIFTY India Consumption Index serves as an indicator of this performance.
The index comprises a diverse set of companies from industries such as consumer non-durables, healthcare, auto, telecommunications, media and entertainment, pharmaceuticals and hospitality that reflect the essence of consumption in India today, spanning essentials and discretionary expenditure. The fund would be managed by fund managers Deepak Agrawal and Viresh Joshi.
What should investors know?
-Being an ETF, the fund is subject to tracking error.
-The fund seeks to track returns by investing in a basket of NIFTY India Consumption Index stocks and aims to achieve returns of the stated index, subject to tracking error.
-Minimum investment starts from Rs 5,000 and in multiples of Rs 1/- thereafter.
-The fund is benchmarked against Nifty India Consumption TRI Index.
-The fund falls under the ‘Very High’ risk category, and investors should consult their financial advisors to check the suitability of the product.
-The NFO opens on 30 August and closes on 13th September.
Management views
Apart from being cost-effective, ETFs let investors invest at real-time prices instead of sector funds’ end-of-day prices. It safeguards their investments against short-term investor inflows and outflows. Additionally, ETFs are ideally adapted to achieve asset-class-linked returns and are hailed as one of the most versatile vehicles for acquiring immediate market exposure and equitizing cash.
“We at Axis AMC strongly stand by being responsible fund house. We strive to provide our consumers with a basket of products that are potently driven by quality and are relevant in the current context giving long-term returns. Through the launch of Axis Consumption ETF, we aim to provide our consumers with an investment option that has proof of growth & strong returns,” said Chandresh Nigam, MD & CEO, Axis AMC