Axis Mutual Fund has announced the launch of its latest New Fund Offer (NFO), the Axis Nifty 500 Value 50 Index Fund. This new index fund aims to provide investors with the chance to invest in a well-diversified portfolio of value stocks at low costs. The subscription window for this NFO opens on 4 October 2024 and will remain open until 18 October 2024.
This fund follows a passive investment strategy, tracking the Nifty 500 Value 50 Total Return Index (TRI). It is designed for investors who believe in value investing—an approach that focuses on selecting stocks available at lower valuations but having potential for growth.
Let’s look at how this NFO works and who can benefit from it.
Key Details of the Axis Nifty 500 Value 50 Index Fund NFO
Category: Open-Ended Index Fund
Subscription Period: 4 October to 18 October 2024
Benchmark: Nifty 500 Value 50 TRI
Fund Managers: Karthik Kumar and Hitesh Das
Risk Level: Very High
Minimum Investment: Rs 100, with subsequent investments in multiples of Re 1
Exit Load: 0.25% if redeemed or switched out within 15 days; no charge after 15 days
What is Value Investing?
Value investing is a type of investment strategy that involves selecting stocks of companies considered undervalued. These are companies whose stocks trade at a price lower than their intrinsic value, based on indicators like price-to-earnings (P/E), price-to-book (P/B), price-to-sales (P/S), and dividend yield.
The Axis Nifty 500 Value 50 Index Fund focuses on investing in the Nifty 500 Value 50 index, which includes 50 such companies from the Nifty 500 universe. These companies are known for having strong fundamentals but are available at lower valuations. This gives investors an opportunity to buy stocks at what is perceived to be a “discount,” with the expectation that these stocks will appreciate in the long term.
Who Should Consider Investing in This NFO?
- Long-Term Investors: If you are looking to invest in companies with solid fundamentals and attractive valuations for long-term wealth creation, this fund could be suitable for you.
- Passive Investors: This is a passive index fund, meaning it doesn’t involve active management of stock selection. If you are an experienced investor seeking to add a passive strategy to your portfolio, this NFO could be a good choice.
- Low-Cost Investors: The NFO offers low expense ratios compared to actively managed funds, making it attractive for cost-conscious investors who want a diversified portfolio without high fees.
Why Should You Consider This Fund?
1. Low Cost:
As a passive fund, the Axis Nifty 500 Value 50 Index Fund offers a low-cost investment option. Since it tracks the Nifty 500 Value 50 index, there’s no active stock picking involved, which helps reduce management costs.
2. Diversification Across Market Caps:
This fund gives you exposure to a mix of large-cap, mid-cap, and small-cap companies, providing a diversified portfolio that can help spread risk across various sectors and industries.
3. Long-Term Wealth Creation Potential:
Historically, value-based indices like the Nifty 500 Value 50 have outperformed broader indices such as the Nifty 500 over time. This suggests that in the long term, the Axis Nifty 500 Value 50 Index Fund could help in building wealth.
4. Factor-Based Investing Strategy:
This fund uses a factor-based approach by focusing on stocks with low valuations. Stocks that are considered undervalued have higher growth potential, offering investors the chance to make profits over the long term.
What are the Risks Involved?
1. Tracking Error:
As with any index fund, there’s a risk of tracking error, which occurs when the performance of the fund does not perfectly mirror that of its benchmark index. A large tracking error can result in differences between the returns of the fund and the index.
2. High Exposure to PSU Stocks:
The Nifty 500 Value 50 index has a significant exposure to Public Sector Undertakings (PSUs). These stocks can sometimes underperform the market, which could impact the performance of the fund in the short term.
3. Short-Term Volatility:
Value stocks may experience significant price swings in the short term. Investors who opt for this NFO need to have a long-term perspective and be prepared for periods of market volatility.
Industry Insights: Growth of Factor-Based Investing
Ashish Gupta, Chief Investment Officer of Axis AMC, highlighted the rapid growth of factor-based investing strategies in India. He noted that the size of factor-based investment products has risen from Rs 300 crore to Rs 30,000 crore in just four years.
Value investing, in particular, allows investors to focus on companies that are trading at low valuations, making them attractive for long-term investments. This NFO provides such an opportunity, with a focus on companies that are considered undervalued and have potential for future growth.
Axis Mutual Fund’s NFO is designed to cater to investors who are looking for long-term value through a cost-effective and diversified approach. The Axis Nifty 500 Value 50 Index Fund offers a smart investment strategy that could benefit investors who want to focus on value stocks and are prepared for short-term volatility.
