28th June 2023:Axis Mutual Fund, one among the fastest growing fund houses in India, announced the launch of their New Fund Offer – Axis Nifty IT Index Fund, an open-ended index fund tracking the NIFTY IT TRI. Mr. Hitesh Das (Fund Manager) would be managing the fund. Axis Nifty IT Index Fund will track the NIFTY IT TRI and aim to provide returns before expenses that correspond to the total returns of the NIFTY IT TRI, subject to tracking errors. The minimum investment amount is Rs. 5,000 and in multiples of Re.1/- thereof.
The main objective of an Index Fund is to replicate a stock market index in terms of the portfolio. All the stocks in these indices will find some representation in their investment portfolio. Essentially, this ensures a performance fairly identical to that of the index being tracked. Within Index Funds, investors have the option to invest in certain Sector Based Index Funds as well, with the aim to capitalize on the growth opportunity provided in that particular sector.
Leveraging the opportunity in India’s growing IT landscape
Technology is a focal point for all businesses, across sectors. All organisations, big or small, are reshaping and accelerating their businesses through new age technology like cloud computing, machine learning, augmented reality, artificial intelligence etc. Consequently, this sector usually seesbetter than expected demand. Indian technology companies have been consistently increasing their market share vis a vis global peer. India’s IT and BPM exports have outperformed global IT services growth. With exports of over US$ 194 billion annually, the IT space is the largest single service exporter industry in India.
As per NASSCOM, the industry is estimated to grow to $245 billion, reflecting an incremental net revenue addition of $19 billion for the year. The growth has been seen in IT services, BPM, software products, ER&D, and the domestic market.
The external headwinds faced in 2022 resulted in valuations of IT companies becoming far more reasonable. Companies are now trading at discount to last 3/5 years’ average multiples. These attractive valuations and a better-than-expected earnings season in Q1FY24 could lead to recovery in revenue momentum from second half of FY24.
Axis NIFTY IT Index Fund
Axis Mutual Fund’s current bouquet of passive offerings almost 20 different schemes, tailored to leverage various benchmarks to achieve its intended objective. While Axis Mutual Fund had introduced the Axis Nifty IT ETF in 2021, the launch of the Axis NIFTY IT Index Fund will enable an investment opportunity for an even wider audience.
The investment objective of the Axis Nifty IT Index Fund is to provide returns before expenses that correspond to the total returns of the NIFTY IT TRI, subject to tracking errors.However, there is no assurance that the investment objective of the scheme will be achieved.The Scheme endeavours to invest in stocks forming part of the underlying index in the same ratio as per the index to the extent possible. Essentially, 95% to 100% of the investments will be made in securities covered by Nifty IT TRI and the remaining in Debt and Money Market investments. To that extent follows a passive investment strategy, except to the extent of meeting liquidity and expense requirements. (Please refer to SID for detailed Asset Allocation & Investment Strategy and other scheme related features available at www.axismf.com).
Some Key Attributes of the Fund include:
- Low cost passive investment solution – A hassle free solution for investors looking for a low cost equity product that will allow them exposure to a particular sector
- Elimination of bias- As the fund invests in the underlying index, it eliminates fund manager bias while purchasing/selling securities
- Equity taxation – As maximum investments will be made in Equity instruments covered by Nifty IT TRI, the scheme is subject to Equity taxation
- Endeavour for minimal tracking error – The passively managed fund endeavours for minimal tracking error as it aims to replicate the benchmark
B. Gopkumar, MD & CEO, Axis AMC said, “India has been a leader in driving change through technology across sectors. This has been more visible in the last three years, post Covid where we showed our resilience and resurgence. We are in the cusp of rewriting our growth story led by technological innovations. Increasingly all companies will be operating in this digital arena. With the launch of the Axis Nifty IT Index Fund, we are expanding our bouquet of products, more importantly, offering our investors an opportunity to be part of India’s tech enabled story.”
Given the mutual fund structure, investors can look to invest through various systematic options like SIPs, STP’s & lumpsum investments.The NFO opens for subscription from 27th June 2023 to 11th July 2023.