SBI Mutual Fund expects to mop up ₹5,000 crore through its seventh thematic new fund offer (NFO) on Automotive Opportunities, which will be open for investors till May 31.

The fund will invest in automobile companies, auto ancillaries, auto exports and electric mobility as a theme to generate long-term capital appreciation for investors.

The thematic fund has an enabling resolution to invest up to 35 per cent of AUM in overseas companies, which generate more than 50 per cent of its revenue from the automobile sector. The provision will be used after the RBI enhances the overall overseas investment limit for the industry from the current $7 billion.

Diversified portfolio

Tanmaya Desai, Fund Manager, SBI Mutual Fund, said though automobile sector is cyclical in nature, the fund house intends to reduce volatility by building a diversified portfolio of 134 stocks, with just 20-30 stocks of leading companies; the remaining will be from the mid- and small-cap companies in the auto ancillary, export-oriented and EV sectors.

Investors should have a three-five year view while investing in this NFO, he said.

DP Singh, Deputy Managing Director, SBI Mutual Fund, said thematic investment has been attracting renewed interest from millennial and Gen Z investors who are willing to take calculated risk for better returns.

Given the past experience, he said the fund house is confident of raising ₹4,000-5,000 crore through the NFO and this is definitely not an AUM-gathering exercise as it will account for less than 1 per cent of overall asset of the fund house.

The fund house collected ₹6,000 crore during the thematic NFO on energy sector in February, and this has already grown to ₹8,000 crore, he said.

SBI Mutual Fund has six thematic funds with AUM of ₹20,000 crore and is working on four-five new themes.

“We do not launch any themes that will face liquidity issue and our NFOs will hit the market only after back-testing it to ensure that it will generate consistent return for investors,” said Singh.