Flipkart co-founder Sachin Bansal-backed Navi Mutual Fund (Navi MF) has announced the launch of Navi Nifty Bank Index Fund, an open-ended passive equity scheme that will replicate the Nifty Bank Index. This new fund offer (NFO), which opened on January 17, will be available for subscription till January 31. However, investors can buy the mutual fund scheme even after the NFO period is over.
Index funds invest in the stocks that constitute an index in the same proportion. In other words, they mimic the benchmark index they track. In this case, the new fund will track the Nifty Bank Index.
The investors will be able to put money in large banking stocks of 10 private and 2 PSU banks, which capture 88 per cent of the market capitalization of all the listed banks, through this NFO.
As of now, Motilal Oswal MF is the only other fund house that runs a Nifty Bank Index Fund with a total expense ratio (TER) of 0.38 per cent. But with a TER of 0.12 per cent, Navi Nifty Bank Index Fund will become the cheapest Nifty Bank Index Fund in the MF industry, the fund house claims. Navi MF mentioned in its press release, “With an expense ratio of 0.12 per cent for the direct plan, the Navi Nifty Bank Index fund reaffirms Navi Mutual Fund's low-cost approach to passive funds already demonstrated in Navi Nifty 50 and Navi Nifty Next 50 index funds.”
The statement issued by Navi MF mentioned that Nifty Bank Index underperformed the broader market since the start of the Covid outbreak in early 2020, but the sector is well-positioned to capture a cyclical uptick in growth.
“India’s aim to become a US$ 5 trillion economy will be driven by significant expansion and growth in our banking sector over the next few years. This sector is clearly poised for growth and Navi’s Nifty Bank Index Fund provides an opportunity for investors to participate in this growth journey,” says a Navi MF spokesperson.
As of January 17, 2022, the top 5 constituents of the Nifty Bank Index are HDFC Bank Ltd (27.80 per cent), ICICI Bank Ltd. (22.62 per cent), Kotak Mahindra (11.61 per cent), Axis Bank Ltd (11.52 per cent) and State Bank of India (11.45 per cent).