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Investors can buy units of Motilal Oswal MoSt Shares Nasdaq 100 ETF(MoSt ETF) as an international diversifier to their portfolio. The ETF will provide exposure to a basket of quality technology stocks that have an outstanding track record, operate worldwide and have shown resilience across economic phases. It is, however, noteworthy that the returns that you finally get may vary in rupee terms based on the dollar-rupee equation.
Even so, MoSt ETF's return has matched the Nasdaq 100 index on which it is based over a six-month period and has, in fact, exceeded it the last three months, partly aided by the rupee depreciation. Over the past three months, the ETF has delivered returns of over 16 per cent and a little over 8 per cent on a six-month timeframe. This is much higher than domestic funds.
While the track record may be relatively short to judge, the underlying stocks and the index present a significant opportunity to diversify with an international touch.
Investors can park small sums of money through a regular SIP in the fund. MoSt ETF, being an international fund, will receive treatment similar to that of a debt fund for capital gains purposes.
The Nasdaq 100 contains some of the best technology names in the world, apart from high quality players in healthcare, consumer services and telecommunications.
Underlying strength
Besides familiar names such as Apple, Google, Microsoft, Amazon and Cisco Systems, there are also top names such as Baidu (top Chinese search engine), Starbucks, Cognizant Technology and Sandisk that have been multi-baggers.
According to Bloomberg data, the index itself is trading at around 14 times trailing earnings and an estimated 12 times forward earnings for 2012, making for a 20 per cent plus growth rates. This is certainly cheaper than what top-tier domestic IT companies command.
Also, earnings commentary from companies such as IBM, Accenture and Oracle have been quite positive on technology spends and the outlook in general, for software and hardware services, remains healthy. Names in healthcare and food chains too add to the potential. These companies haveeither minimal or no net debt at all. Investors, however, have to take a longer-term approach of, say, three-five years, to gain maximum benefit, as the index can go into a lull for prolonged periods of time.
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