 "Mutual funds (MFs) managed a record Rs 66.2 trillion in assets during the July-September quarter, marking a 12.3 per cent increase over the previous three-month period — the highest quarterly jump in MF assets in at least five years.")
Nippon India Asset Management has launched two new index funds, Nippon India Nifty 500 Quality 50 Index Fund and Nippon India Nifty 500 Low Volatility 50 Index Fund on April 16, 2025.
Aim is to deliver cost-effective, diversified exposure to the Indian equity market. Market watchers are debating whether these passive products offer enough value for retail investors rushing to invest before the April 30 closing date.
Chethan Shenoy, executive director and head of product & research at Anand Rathi Wealth Limited, weighs in, calling for “cautious optimism” and a deeper understanding of these funds’ structures.
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Two Indices, Two Themes
The Quality 50 Index Fund will track top companies from the Nifty 500 that exhibit strong fundamentals --companies with high return on equity (ROE), solid earnings, and low debt.
In contrast, the Low Volatility 50 Index Fund targets companies with the least price fluctuation over the past year. “It focuses on price stability,” Shenoy explains, “Ideal for investors wary of market swings.”
Cost-Effective but Limited Flexibility
Though passive funds typically boast lower expense ratios, Shenoy warns against equating low cost with high performance. These funds will only rebalance twice a year.
Underperformers may stay in the portfolio longer due to this rigid structure.
Historical performance has been inconsistent. “Out of the last six years, these strategies delivered alpha in only three,” he notes.
Who Should Invest?
Despite a low minimum investment of ~1,000, Shenoy suggests retail investors tread carefully. “NFOs often lack a proven track record. It’s safer to go with funds that have been tested across market cycles,” he advises.
Strategy Over Hype
Instead of rushing into new offerings, Shenoy recommends a well-diversified equity portfolio:
- Blend of market-cap-based funds
- Inclusion of focused and value-oriented funds
- Active management that adapts to market shifts
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