NFO alert: Bajaj Allianz Life launches Mid Cap Index Fund

The Bajaj Allianz Life Mid Cap Index Fund is designed to tap into the Nifty Midcap 150 Index's high-growth potential

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Life insurance major Bajaj Allianz Life Insurance has once again come out with a new fund offer (NFO), this time in the mid-cap space. 
 

The Bajaj Allianz Life Mid Cap Index Fund will invest in the constituents of  the Nifty Midcap 150 Index's high-growth potential. The new fund offer (NFO) period will close on November 28, 2023. 

Earlier this year in May, Bajaj Allianz launched a Small Cap Fund, which tracks the Nifty Small Cap 100 index. 
 

According to Bajaj Allianz Life, its latest offering, Bajaj Allianz Life Mid Cap Index Fund is well diversified as it invests in a broad spectrum of stocks from the Nifty Midcap 150 Index, thus spreading risk across different sectors and companies. There is also transparency as it’s an index fund, and investors can easily monitor the fund’s portfolio and performance.

The company said that  fund “aims to provide investors with the opportunity for capital appreciation by strategically focusing on mid-cap equities known for their higher growth potential.”

 “Historical data shows that mid-cap indices have helped in wealth creation for investors over the long term and managed to outperform the large-cap indices by a substantial margin," said  Sampath Reddy, Chief Investment Officer, Bajaj Allianz Life Insurance/

As of September 2023 end, the Nifty Midcap 150 index has delivered a return of 21.2 per cent (CAGR) over 10 years, while the Nifty 50 index has returned 13.1 per cent (CAGR) over the same period. 

"Investors in mid-cap stocks should note that they are subject to higher market risk and volatility. Therefore, the midcap index fund is more suited to investors with a higher risk appetite and longer investment horizon. Historical data shows that mid-cap indices generally tend to outperform in bull-markets and tend to underperform or see relatively higher drawdown (downside risk) during market corrections," the company said in a release.
 

Here are some of the pros and cons of investing in a Nifty Midcap Index Fund:

1. Diversification: Exposure to a diversified portfolio of mid-cap stocks reduces the impact of poor performance from individual stocks.
 

2. Growth Potential: Mid-cap stocks typically offer higher growth potential compared to large-cap stocks.
 

3. Performance History: The Nifty Midcap 150 Index has historically delivered higher average returns compared to the Nifty 50 Index.
 

4. Higher Risk: Mid-cap stocks are inherently riskier and more volatile than large-caps, making them suitable for investors with a higher risk tolerance.
 

5. Market Volatility: Mid-cap stocks are sensitive to market volatility and may experience higher drawdowns during market corrections.
 

6. Risk Appetite: These funds are better suited for investors with a higher risk appetite and longer investment horizons.