Reliance Index Fund-Nifty Plan Sensex Plan Fund NFO: Review Analysis & Details

This article contains info about Reliance Index Fund - Nifty Plan Sensex Plan Fund NFO, Review, Analysis, Details & Opinion. NFO or New Fund Offer from the largest mutual fund house of India has come through. High on the heels of the Reliance Small Cap Fund (See Review), the Reliance MF Mutual Fund House has launched its NFO or New Fund Offer for two index funds called the Reliance Index Fund - Sensex Plan Fund and Reliance Index Fund - Sensex Plan Fund. With the launch of these 2 new index funds, Reliance Mutual Fund has added 2 index funds to its portfolio.
In this article, we will analyse how good is this Reliance Index Fund - Nifty Plan Sensex Plan Fund NFO, whether this Reliance Index Fund - Nifty Plan Sensex Plan Fund offers anything new or unique for the investors and whether the investors should invest in Reliance Index Fund - Nifty Plan Sensex Plan Fund .

Reliance Index Fund - Nifty Plan Sensex Plan Fund NFO: Review Analysis & Details

Let's begin with some basic details about Reliance Index Fund - Nifty Plan Sensex Plan Fund.

What are the NFO dates for Reliance Index Fund - Nifty Plan Sensex Plan Fund ?
The NFO period for Reliance Index Fund - Nifty Plan Sensex Plan Fund are 9th September 2010 to 23rd Septmeber 2010.

What is so unique about this Reliance Index Fund - Nifty Plan Sensex Plan Fund?
These are 2 different funds lauched by Reliance, one is the Reliance Index Fund - Nifty Plan and the other is Reliance Index Fund - Sensex Plan Fund As the names suggests, these 2 index funds will be trying to replicate the performance of the respective indes which they are going to track. However, since they are index funds, there will be tracking error and investors should be aware of this. The tracking error is the difference in the returns generated by the underlying index and the returns generated by the index fund.
Why and how does the tracking error come in?
The underlying index like Nifty or Sensex does not have any brokerage charges or any dependent trading activities. However the index funds do have them. As the fund managers try to replicate the performance of the underlying index, they buy and sell securities and try to maintain their fund in similar proportion to the index, they end up paying brokerage charges which affects the returns. The frequency of rebalancing the fund constituents also takes a toll. For more informtion on Index Funds, see Index Funds Explained with Example)

So overall, depending upon the frequency of rebalancing and trading activities of the fund manager, the returns from Reliance Index Fund - Nifty Plan and Reliance Index Fund - Sensex Plan Fund will be generated for the investors. investors can choose their preferred index fund, either based on Nifty or based on Sensex. Nifty is composed of top 50 stocks based on market cap and Sensex is top 30 stocks. Continue to Part II -Risks in Reliance Index Fund - Nifty Plan Sensex Plan Fund and other competitive products