The Birla SunLife Mutual Fund House is launching their Birla SunLife Nifty ETF. Interestingly, there seems to be a lot of Nifty based Exchange Traded Funds now being launched by the various fund houses. Recently, it was the Religare Nifty ETF (See Details) which was launched by Relgare, and even biral Sunlife had come out with its Gold based ETF called Birla Sun Life Gold ETF. So ETF's or Exchange Traded Funds seems to be the flavour of the season and Birla Sunlife has jumped on the bandwagon to get a piece of cake.
In this article, we will analyze how good is this Birla SunLife Nifty ETF NFO, whether this Birla SunLife Nifty ETF offers anything new or unique for the investors and whether the investors should invest in Birla SunLife Nifty ETF.
Birla SunLife Nifty ETF NFO: Review Analysis & Details
Let's begin with some basic details about Birla SunLife Nifty ETF.What are the NFO dates for Birla SunLife Nifty ETF?
The NFO period for Birla SunLife Nifty ETF is currently open and will close on 18th July 2011. After the NFO period, the regular buying and selling of fund units will start, but the precise date is not known.
What is so unique about this Birla SunLife Nifty ETF?
We've covered a lot about ETF's in detail with examples of returns calculations in our articles like Example of Nifty based ETF.
This new ETF from Birla Sunlife is expected to work the same way. Collect money from investors, pool it together, purchase Nifty based shares in the same proportion as they are listed in Nifty index and attempt to generate the returns similar to Nifty.
However, there comes a tracking error, which essentially means that the returns generated by fund manager of Nifty ETF may not be exact replica of the returns generated by Nifty Index, due to many trading activities and buying/selling/redemption of units by individuals.
So in essence, there is nothing very unique about this Birla SunLife Nifty ETF if you compare it to other Nifty based ETF's. Instead, investors are now spoilt for choice in the Nifty based ETF space as there are lot of them available.
The asset allocation for Birla SunLife Nifty ETF will be as follows:
95% to 100% will be invested in the nifty based securitites
Rest 0-5% will be in debt and money market instruments for unit redemption and creation purposes.
What are the other competitor products available in comparison to Birla SunLife Nifty ETF?
As mentioned above, there are lots of other Nifty based Exchange Traded Funds available in the market which are similar to this Birla SunLife Nifty ETF
The Birla SunLife Nifty ETF will track the standard benchmark index S&P CNX Nifty Index for tracking its performance.
What are the risks of investing and trading Birla SunLife Nifty ETF?
By investing in any index based ETF, you are taking the risk on overall market. If the overall Indian stock market (represented by Nifty & Sensex) collapses, then so will be the fate of your investments in this fund.
Along with that, you are also taking the risk on the performance of your fund manager. If the fund manager is not able to replicate the stocks in the same proportion as that of Nifty index, your returns might suffer (it might perform better than Nifty also, although a rare case)
You are also taking the tracking error risk. Since not 100% of your money will get invested in this fund (only 95%-100%), the tracking error comes in.
Final Thoughts about Birla SunLife Nifty ETF?
Another good option for trading the overall Nifty Index. Being an ETF it will give you the benefit of Intraday price movements and benefit from them as a trader, if you can. As a long term investor, you can buy and hold it without much of recurring expenses.
The brokerage charges would apply only on transactions.
See List of All Mutual Fund and NFO Articles here
During NFO period each unit cost Rs. 10 per unit
Minimum investment Rs 5,000 and in multiples of Re 1 afterwards.
No tax benefit will be available in Birla SunLife Nifty ETF
Mr. Satyabrata Mohanty will be the fund manager for Birla SunLife Nifty ETF
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