Nilanjan Dey

Kolkata, April 12

CHOLAMANDALAM MF has lined up a scheme for investing in all the stocks that comprise the S&P CNX Nifty regardless of their weightage in the index.

The proposed Chola Dynamic Index Fund will try to generate capital appreciation by allocating up to 100 per cent of its assets in the 50 scrips that constitute the Nifty. A maximum 20 per cent may be invested in money market instruments.

An entry load of one per cent will be fixed for investments up to and including Rs 10 lakhs. There will be no exit load. However, for systematic investments, there will be an exit load of one per cent if a unit holder redeems before a year.

The fund, to be managed by Mr Tridib Pathak, will remain invested at all times in the Nifty stocks but not necessarily in the same weightage - a policy that is in keeping with its dynamic strategy.

"The strategy will be to dynamically manage the diversified portfolio of stocks comprising S&P CNX Nifty with medium to long term potential with exposure in any one stock restricted to 10 per cent of the NAV or weightage to NAV equivalent to the weightage the stock has in S&P CNX Nifty, whichever is higher," the offer document filed with SEBI for clearance has mentioned.

The benchmark index, it may be mentioned, is managed by India Index Services & Products Ltd, a joint venture between NSE and Crisil, the rating agency. It currently represents over 20 sectors and accounts for about 55 per cent of the combined market capitalisation of NSE-listed stocks. As on March 31, the Nifty heavyweights included ONGC (13.26 per cent), Reliance (8 per cent), Infosys (6.41 per cent), Wipro (4.96 per cent) and Bharti (4.04 per cent).

Index fund clones

THE latest Chola proposal will add to the group of equity schemes that allow investors to allocate mainly to index scrips without following the normal, passive style that index funds are known for. These, according to Value Research, have provided 6.04- 16.86 per cent returns in the past year.

UTI Index Select Equity, which draws its portfolio from stocks comprising both Sensex and Nifty, has yielded 7.52 per cent as on April 11, while LIC Sensex Advantage (which invests 90 per cent of its assets in Sensex constituents and 10-20 per cent in others) has given 16.86 per cent.

ING Vysya Nifty Plus, which allocates mainly to Nifty stocks in approximately the same weightage that they represent in the benchmark and leave room up to 25 per cent for active management, has given 6.04 per cent.

HDFC Index Sensex Plus, which invests 80-90 per cent in Sensex counters and between 10-20 per cent in those that are out of it, has provided 14.8 per cent to investors.

(This article was published in the Business Line print edition dated April 13, 2005)
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