Axis Nifty 100 Index Fund: Another index fund on the block

Amid market volatility, leading asset management companies have been launching new funds, seeking to tap into new opportunities. Axis AMC has launched a new fund tracking the Nifty 100 Index — Axis Nifty 100 Index Fund — allowing investors to participate passively in the entire large-cap universe.

The companies under the Nifty 100 index are predominately large-cap companies spread across 16 industries.

The primary objective of this open-ended index fund is to track the Nifty 100 index and create long-term wealth for investors. The fund invests in a basket of Nifty 100 index stocks and aims to achieve returns of the Nifty 100 index but subject to tracking error. Tracking error is the difference between returns of the fund portfolio and the respective benchmark index. In general, tracking errors are calculated against the total return index (TRI) that includes dividend payments.

In vogue

Globally, index funds are popular vehicles. In the domestic arena, they have been gaining traction in recent times. This is because they remove the risk of security selection and rely on broader market knowledge. Also, passive funds copy the constituents in the same proportion as the index and provide returns almost similar to that of the respective benchmark index in different market scenarios. Finally, both exchange-traded funds (ETFs) and index funds are popular vehicles to passive investing. Benefits of investing in an index fund are lower expenses, better diversification, consistent style and market-linked returns.

The Nifty 100 index essentially captures both the Nifty 50, which is mainly a large-cap substitute consisting of large bluechip stocks, and the Nifty Next 50 that consists of stocks having the potential to scale up and form part of the Nifty 50 basket. Interestingly, the Nifty 100 has a dividend yield of 1.36 which is almost close to the Nifty 50 dividend yield of 1.39. Also, the Nifty 100 has outperformed the Nifty 50 in eight out of the past 10 financial years. During market falls, the Nifty 100 has been able to limit the downside better than the Nifty 50.

The Nifty 100 has 37.3 per cent sector weight in financial services, followed by IT (13.5 per cent) and energy (13.4 per cent). HDFC Bank, RIL, HDFC, Infosys and ICICI Bank are the top five companies.

For investors looking to create long-term wealth, index-based products offer good investment opportunities. Moreover, investors can consider various systematic options such as systematic investment plans (SIPs), systematic transfer plans (STPs) and flexi SIPs/STPs in addition to lump-sum investments.