Why ICICI Prudential has launched a Nifty LargeMidcap 250 index fund

ICICI Prudential Mutual Fund on Thursday launched an index fund called Prudential Nifty LargeMidcap 250 Index Fund, which represents all companies from the Nifty 100 and Nifty Midcap 150 universe. 

The index fund provides exposure to both large and midcap segments of the market anLarge caps tend to offer reasonable stability during market corrections, whereas, Mid caps offers relatively high growth during rising market scenariosd historically the large Midcap index has outperformed Large cap indices during an economic boom. "In terms of performance, historically, Nifty LargeMidcap 250 TRI has offered better return, at lower risk, compared to that of NIFTY 100 TRI and Nifty MidCap 150 TRI. Over the last decade, the index has generated a CAGR of 23.22%. When it comes to calendar year returns, the Nifty LargeMidcap 250 index has outperformed Nifty 100 index 7 times in last 10 years," the AMC said in a release.

The New Fund Offer period is from February 22 to March 7, 2024 and. Nishit Patel, Priya Sridhar and  Kewal Shah are the fund managers. Index mutual funds create a portfolio which mirrors a market index. The securities included in the portfolio and their weights are the same as that in the index. The fund manager does not rebalance the portfolio based on their view of the market. These funds are passively managed, which means that the fund manager makes only minor, periodic adjustments to keep the fund in line with its index. 

The Scheme seeks to invest in companies whose securities are included in Nifty LargeMidcap 250 Index in the same weightage that they represent in the Nifty LargeMidcap 250 Index in order to achieve the returns of the above index, subject to tracking errors.

The index portfolio looks like this: 

The index is re-balanced on a semi-annual basis and the aggregate weightage of large-cap stocks and mid cap stocks is maintained at 50 per cent each. 

So why launch such an index fund? 

1. As per ICICI Prudential Mutual Fund, large caps tend to offer reasonable stability during market corrections, whereas, Mid caps offers relatively high growth during rising market scenarios.
2. Large & Midcap offer more diverse and balanced sector allocation as compared to just large caps or just mid caps. 
3. Nifty LargeMidcap Index has provided 23.22% CAGR over the last 10 years

SIP Returns of the Index 

Nifty LargeMidcap 250 index has outperformed Nifty 100 index 7 times in last 10 years