Nfo review | Icici Prudential Nifty It Index Fund: Investment Strategy & Other Details

by inshol IST (published)

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NFO: Below is a review of the ICICI Prudential Nifty IT Index Fund. Read on to find out if you should invest in this

The ICICI Prudential Mutual Fund recently launched the ICICI Prudential Nifty IT Index Fund. This is an open index chart that replicates the Nifty IT Index by investing in a basket of Nifty IT stocks and aims to achieve the stated index returns, subject to tracking error. The New Fund Offer (NFO) is open until August 11, 2022.

The minimum order amount during this NFO is Rs 1,000. The show will be moderated by Kizad Eglim and Neshet Patel.

About the fund

The ICICI Pru IT Nifty Index Fund is a 10 stock index fund with a 53.2 percent allocation to the two largest IT companies – Infosys and TCS and the remaining allocation to other local names. The top 5 stocks make up 80 percent of the total index components.

Why the IT Fund?

Over the years, the IT sector tends to recover stronger after any crisis such as the subprime mortgage crisis, gradual tantrums, and the COVID-19 pandemic. Also, information technology is one of the sectors that will benefit from the depreciation of the rupee as a large portion of its revenue comes from exporting to US markets, according to Finance House.

In terms of performance, over the past decade, the Nifty IT TRI has outperformed the Nifty 50 TRI by offering a compound annual growth rate (CAGR) of 18.4 percent compared to a 12.9 percent compound annual growth rate of the Nifty 50.

(Source: ICICI Prudential Mutual Fund)

So, should one invest?

According to Amar Rano, Head of Investment Products and Advisory, Anand Rathi Equities and Bonds, it is a highly focused, cost-effective IT portfolio.

“However, other actively managed IT/technology funds have better portfolio diversification than this fund, but they come at a higher cost,” Rano said.

India’s IT industry exports grew 65% in 7 years

(Source: ICICI Prudential Mutual Fund)

In terms of performance, he said that IT is a focus worldwide, has been in demand for a long time and created space in the investment portfolio for themselves, and has accelerated even more during COVID times when there was a demand for technological improvements for most companies.

“However, amid the weak macroeconomic environment, there has been margin pressure including high attrition rates in recent quarters for most IT companies. Unlike in the past, where we have seen double-digit growth, we expect the sector to record a decline in its teens,” Rano said during Speaking to “Growth Soon but Maintain Positive Attitude Over the Medium Term” CNBC-TV18.com.

Who should invest here?

Investors with a keen appetite for risk and an IT orientation can cost-effectively take a small allocation in the tactical portion of the overall portfolio. Rano said this should not be part of the strategic portfolio allocation CNBC-TV18.

Note to readers

Disclaimer: The investment opinions and advice expressed by investment experts on CNBCTV18.com are their own and are not specific to the website or its management. CNBCTV18.com advises users to consult certified experts before making any investment decisions.

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