Motilal Oswal Nifty MidSmall Financial Services Index Fund (G): NFO Details

resr 5paisa Research Team

Last Updated: 24th October 2024 - 03:17 pm

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Motilal Oswal Nifty MidSmall Financial Services Index Fund (G) is a passively managed index fund that tracks Nifty MidSmall Financial Services Index. This index comprises mid cap and small cap companies within India's financial services sector, offering investors exposure to a diversified basket of banks, non banking financial companies (NBFCs), insurance and other financial institutions. The fund aims to replicate the performance of its benchmark index with minimal tracking error. It is designed for investors seeking long term capital growth through a cost efficient, passive investment strategy in the evolving financial services space of mid and small cap companies.

Details of the NFO: Motilal Oswal Nifty MidSmall Financial Services Index Fund (G)

NFO Details Description
Fund Name Motilal Oswal Nifty MidSmall Financial Services Index Fund (G)
Fund Type Open Ended
Category Equity/ Sectoral - Banking
NFO Open Date 29-October-2024
NFO End Date 06-November-2024
Minimum Investment Amt ₹500/- and any amount thereafter
Entry Load Nil
Exit Load If you sell your investment within 15 days of buying it, you'll be charged a 1% fee. After 15 days, there are no charges for selling.
Fund Manager Mr. Swapnil Mayekar and Mr. Rakesh Shetty
Benchmark Nifty MidSmall Financial Services Total Return Index

 

Investment Objective and Strategy

Objective

The scheme aims to offer returns that closely match the total returns of the Nifty MidSmall Financial Services Total Return Index, before accounting for expenses. However, it cannot guarantee that this objective will always be met due to possible tracking errors.

Investment Strategy

The Motilal Oswal Nifty MidSmall Financial Services Index Fund follows a passive investment strategy by investing in companies from the Nifty MidSmall Financial Services Total Return Index. Its goal is to achieve returns similar to the benchmark with a small tracking error. It also invests in liquid funds, debt instruments and money market instruments based on its asset allocation.

Securities Lending: The fund may participate in securities lending as allowed by SEBI regulations.

Investment by AMC/Sponsor in the Scheme: Asset Management Company (AMC) can invest in the fund during the New Fund Offer (NFO) period if required by regulations. No fees will be charged for these investments.

Investment of Subscription Money: During the NFO period any money raised may be temporarily invested in TREPS (a short term money market instrument). Any gains from this will be passed on to investors. If the minimum required amount isn't raised during the NFO both the invested amount and any interest earned will be refunded to investors.

Portfolio Turnover: Since this is an open ended fund with daily subscriptions and redemptions, it’s difficult to predict the fund's portfolio turnover (the rate at which stocks are bought and sold).

Why Invest in Motilal Oswal Nifty MidSmall Financial Services Index Fund (G)

1.    The fund offers exposure to a diversified mix of mid cap and small cap companies in the financial services sector including banks, NBFCs insurance firms and more helping to balance risk and growth potential.

2.    It follows a passive strategy, tracking Nifty MidSmall Financial Services Total Return Index. This allows investors to benefit from the sector’s performance without actively managing the investment.

3.    The mid and small cap financial services sector has significant growth potential, especially with the expanding financial landscape in India.

4.    As a passively managed fund it typically has lower fees than actively managed funds making it a cost effective option for long term investors.

5.    The fund operates under SEBI regulations ensuring transparency and investor protection.

Strength and Risks - Motilal Oswal Nifty MidSmall Financial Services Index Fund (G)

Strengths

1.    The fund focuses on the financial services sector specifically mid cap and small cap companies providing investors access to an area of the market that has strong growth potential as financial services expand in India.

2.    It includes a wide range of financial institutions such as banks, NBFCs, insurance companies and other financial firms which helps spread risk across multiple sub sectors within financial services.

3.    As an index fund, it follows a passive investment approach which comes with lower management fees compared to actively managed funds making it a more cost efficient option.

4.    Mid and small cap companies often have higher growth potential compared to large cap firms offering the possibility of strong long term returns as they expand and gain market share.

Risk

Risks Associated with Investing in Equities

Investments in the companies that make up the index can experience daily price changes due to factors like economic or political events, interest rate changes and overall market conditions. This can cause the value of the fund to go up or down.

Index Based Risk

Since the fund invests in the same stocks and in the same proportions as the index, it will be impacted by any risks associated with that index. The fund doesn’t make active decisions about what to buy or sell and will follow the index even if market conditions worsen.

Dividend Reinvestment Risk

Dividends are reinvested into the companies in the index after their ex-dividend dates. However, since there is a delay in receiving dividends, it can lead to a difference between the fund’s performance and the index called tracking error.

Market Risk

The fund’s value will fluctuate with changes in the stock market. The performance of the companies in the fund as well as factors like interest rates, inflation and government policies, can affect the fund’s value.

Concentration Risk

There is a risk that too much exposure to certain companies or sectors could negatively impact the fund if those areas perform poorly.

Passive Investment Risk

Since the fund is not actively managed it follows the index even if the market is declining. The fund manager doesn’t try to pick better performing stocks or adopt defensive measures.

Redemption Limits

In unusual market conditions, the fund may limit how many units investors can redeem in a day to protect all investors, following SEBI guidelines.

Portfolio Rebalancing Risk

If the fund’s investments deviate from the target asset allocation, the fund manager will rebalance the portfolio. However, if market conditions prevent this, the fund will notify the trustee board and provide a justification.

Index Fund Risk

As an index fund, the scheme only invests in the stocks that make up the index regardless of market conditions. If the overall market declines the value of the fund will also decrease.

Conclusion

Motilal Oswal Nifty MidSmall Financial Services Index Fund offers targeted exposure to the growing financial services sector through a passive investment strategy. While it provides potential for capital appreciation, investors should be aware of market risks, tracking errors and the inherent volatility associated with equity investments.
 

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