ICICI Prudential Mutual Fund has launched the ICICI Prudential Nifty SDL Sep 2026 Index Fund, an open-ended passively-managed target maturity index fund.
The fund seeks to replicate the underlying debt index with a specific maturity date. So the index constituents are "hold-till-maturity" assets.
The new fund offer (NFO) for the ICICI Prudential Nifty SDL (State Development Loans) Sep 2026 Index Fund will run from December 15 to 20, 2022.
The scheme will invest in the Nifty SDL Sep 2026 Index constituents to match the underlying index's returns.
SDLs are issued by state governments to manage state finances and fund fiscal deficits, similar to government securities (G-Sec) issued by the central government. SDLs, therefore, provide one of the lowest credit risks.
Commenting on the fund, Chintan Haria, head of product development and strategy at ICICI Prudential AMC, in a press release on Thursday, said fifteen states and union territories (UTs) are selected based on the highest composite score (outstanding amount and liquidity score), calculated as on September 30, 2022, for SDLs maturing during the six-month period ending September 30, 2026.
Haria added, "In a rising interest rate scenario, investors looking for fixed-duration returns within a specific maturity bucket can consider investing in target maturity index funds."
Key Features Of The ICICI Prudential Nifty SDL Index Fund
• Critical features of target maturity index funds include a “hold-to-maturity approach” as it replicates the underlying index comprising SDLs of various state governments and UTs or G-Secs, depending on the offering chosen.
• The fund house said if held for over three years, investors can get an indexation benefit, which enhances the post-tax returns of those in higher tax brackets.
• The ICICI Prudential Nifty SDL, Sep 2026 Index Fund, seeks to invest in an SDL maturity segment of more than 3.5 years.
• Tax on short-term capital gains (STCG) is applicable as per income slabs, and long-term capital gains (LTCG) are taxed at 20 per cent, with an indexation benefit.
• The fund provides exposure to government-backed financial instruments.
• This open-ended scheme has no lock-in period and allows one to buy and sell.
• The underlying index matures in September 2026; hence, the fund is suitable for those looking for a medium-term goal.