AssetPlus NFO Review: Nippon India Nifty Midcap 150 Index Fund

by Maheswaran Hariharan

Nippon India AMC is launching an NFO, which is set to open for subscription from Feb 4th, 2021 and closes on Feb 12th, 2021.

Investment Objective: To generate wealth over the long term, suitable for investors having a high risk appetite who are comfortable with notional losses in the short term.

Investment Strategy: The fund emphasizes on Nifty Midcap 150 Index(Listed stocks on NSE from 101 to 250). Stocks are filtered based on free float market capitalization of the index and there is no bias given to any specific sector or stocks. The focus is to create returns which can replicate the benchmark. The portfolio is diversified across various sectors but is limited to only to Midcap stocks.

Fund Manager: Mehul Dama

Benchmark: Nifty Midcap 150 TRI

Minimum Lumpsum Investment Amount: Rs 5,000

Minimum SIP Investment Amount: Rs 100

Fund Management Process:

  1. Selection criteria is purely from Nifty Midcap 150.

2. Fund will replicate the Index based on free float market capitalization.

3. Any changes in the benchmark will automatically reflect in the Index fund as well.

4. The fund is rebalanced on a semi-annual basis.

Opportunity:

The Price to Book(P/B) valuations of Nifty Midcap 150 Index is extremely attractive when compared to that of Nifty 50 as depicted in the below graph. This makes it a promising opportunity for investors who are looking to diversify their portfolio in Midcap space. The valuations are taken as on January 15th, 2021. Source: NSE

Price to Book Valuations of Nifty Midcap 150 vs Nifty 50

The current Price to Book(P/B) valuations of Nifty Midcap 150 is significantly lower when compared to its peers as mentioned in the below table. Interestingly, Nifty Midcap 150 has a much higher Dividend Yield when compared to Nifty 50, Nifty 100 and Nifty 500.

Table representing various indices with their PB Ratio and Dividend Yield

Based on our analysis, we have observed the following pros and cons

Pros:

  1. No Fund Manager Bias or Human Intervention
  2. Focuses on companies which have the potential to become Large Caps
  3. No Exit Load
  4. Sector Agnostic
  5. Low Cost as it is Index Based

Cons:

  1. Limited to just Nifty Midcap 150 Universe
  2. Highly Diluted as it invests compulsorily in 150 stocks.
  3. Restricted to only a specific market capitalization
  4. Cannot take active calls like holding cash in a portfolio

This fund does not have an active fund management but focuses more on growth story of Midcap category as a whole. There is no filter used in selecting midcap stocks as each and every one of them is included in a specific proportion which makes it a risky bet but at the same time provides an opportunity for higher returns. It is of utmost importance that the fund should be discussed with your financial advisor and then ascertain whether it is suitable to invest. Always read the scheme documents fully before investing.