NFO review: SBI ETF Consumption, a passive play on consumer sector

The New Fund Offer opens on June 30 and closes on July 14, 2021; the ETF will track Nifty India Consumption Index

Staff Writer   /   July 1, 2021

SBI Mutual Fund has announced the launch of SBI ETF Consumption, an open-ended scheme tracking Nifty India Consumption Index. The new scheme would be suitable for investors who are seeking long term capital appreciation and investment in securities covered by Nifty India Consumption Index. The new fund offer will open on June 30, 2021 and closes on July 14, 2021.

The investment objective of the scheme is to provide returns that closely correspond to the total returns of the securities as represented by the underlying index, subject to tracking error.

ETF details

The Nifty India Consumption Index was launched on January 2, 2006 and comprises of 30 companies. The Nifty India Consumption Index is designed to reflect the behaviour and performance of a diversified portfolio of companies representing the domestic consumption sector which includes sectors like Consumer Non-durables, Healthcare, Auto, Telecom Services, Pharmaceuticals, Hotels, Media & Entertainment. The Nifty India Consumption Index is rebalanced on a semi-annual basis.

The index’s top 10 holdings are Hindustan Unilever, ITC, Asian Paints, Bharti Airtel, Maruti Suzuki India, Mahindra & Mahindra, Titan Company, Nestle India, Bajaj Auto and Avenue Supermarts.

SBI ETF Consumption would invest minimum 95 per cent and maximum 100 per cent investment in securities covered by Nifty India Consumption Index with up to 5 per cent in Equity Derivatives & up to 5 per cent in Money Market instruments and units of liquid mutual fund.

The minimum application amount (during the NFO period) required is of Rs 5,000 and in multiples of Re 1 thereafter.  

The Fund Manager for SBI ETF Consumption is Harsh Sethi who also manages SBI ETF IT and SBI ETF Private Bank.

Consumption funds

At present, there are 12 existing funds to play consumption theme. The current funds include ABSL India GenNext, Sundaram Rural & Consumption, Mirae Asset Great Consumer, Tata India Consumer, BNP Paribas India Consumption, SBI Consumption Opportunities, Canara Robeco Consumer Trends, UTI India Consumer etc.

Besides SBI ETF Consumption, the only other consumption ETF is Nippon India Consumption ETF, which was launched in 2014.

In the last 1-, 3-, 5 and 10-year periods, consumption oriented thematic funds have delivered 51.39 per cent, 12.90 per cent, 14.88 per cent and 15.03 per cent CAGR respectively.

Fund-house speak

Vinay M. Tonse, MD & CEO, said: “We believe passive funds are gaining traction around the world and in India as well where investors would like to invest in line with an index. Investments in ETFs are beneficial for those looking to get exposure to a broad range of asset classes at a lower cost.

With the addition of SBI ETF Consumption, we continue to augment to our portfolio of offerings in the passive investment space, in addition to our actively managed funds. I believe SBI ETF Consumption is a good opportunity as India’s potential for domestic consumption is very large and continues to be a strong growth story.”

D P Singh, Chief Business Officer, said: “Among the passive investment options, ETFs provide many benefits to investors such as diversification, liquidity, low cost, simplicity and transparency. Consumption has grown consistently over the last few decades and is expected to provide value to investors in the long term as well. We will continue to expand our offerings to help investors achieve their investment goals and provide them access to similar fast-growing themes’’.

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