DSP Launches Nifty IT Index Fund NFO to Tap Tech Sector Growth

The NFO is a passively managed index fund designed to replicate the performance of the Nifty IT Index as closely as possible. It aims to deliver long-term capital growth by investing in stocks that form part of the Nifty IT Index, maintaining a portfolio that mirrors the index composition. The scheme does not seek to outperform the index but to track its returns before expenses, with some allowance for tracking errors. This product is suitable for investors looking for exposure to the IT sector through a low-cost, transparent, and diversified fund. The NFO offers an accessible minimum investment amount and operates within a defined subscription period.

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Key Features of DSP Nifty IT Index Fund

• Opening Date: 2 June 2025
• Closing Date: 16 June 2025
• Exit Load: Nil (subject to scheme terms)
• Minimum Investment Amount: ₹100

Objective of DSP Nifty IT Index Fund

The objective of the DSP Nifty IT Index Fund NFO is to provide returns that correspond to the total return of the Nifty IT Index before expenses, subject to tracking error. It aims to offer long-term capital growth by investing in equity and equity-related securities that constitute the Nifty IT Index. There is no guarantee that the scheme will achieve its stated objective.

Investment Strategy of DSP Nifty IT Index Fund

• Employs a passive or indexing approach to replicate the Nifty IT Index.
• Invests in the same stocks as the Nifty IT Index in similar proportions.
• Does not attempt to outperform the index or time the market.
• May invest temporarily in equity derivatives for rebalancing or defensive purposes.
• Derivative use is limited and aimed only at managing short-term portfolio adjustments.

Risks Associated with DSP Nifty IT Index Fund

• Market Risk: The value of the fund’s investments may fluctuate due to market movements.
• Tracking Error Risk: The returns may slightly differ from the underlying index due to expenses and fund management.
• Sector Concentration Risk: As it focuses on IT stocks, sector-specific downturns may impact performance.
• Derivative Risk: Temporary use of derivatives can lead to higher volatility and potential losses.
• Liquidity Risk: The ability to buy or sell units may be affected during market disruptions.

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Risk Mitigation Strategy by DSP Nifty IT Index Fund

The NFO mitigates risks primarily through diversification by investing across all constituent stocks of the Nifty IT Index in the same proportions, reducing single-stock risk. Its passive investment style avoids the risk of poor stock selection. Temporary use of derivatives is cautiously managed and employed only for portfolio rebalancing or defensive needs, minimising exposure to derivative-related volatility. The fund aims to maintain low tracking error by closely monitoring and aligning its holdings with the index composition. Regular portfolio rebalancing helps manage corporate actions and market changes, reducing tracking deviations and market impact.

What Type of Investor Should Invest in DSP Nifty IT Index Fund?

• Investors seeking long-term growth by tracking the IT sector.
• Those who prefer a low-cost, transparent, and diversified passive investment.
• Investors are comfortable with sector-specific risk and market fluctuations.
• Individuals with an investment horizon of at least 5-7 years.
• Investors who want to avoid active stock selection and market timing.