Aditya Birla Sun Life Nifty Midcap 150 Index Fund: Focused on Investing in Midcap Companies

Mar 19, 2021

Listen to Aditya Birla Sun Life Nifty Midcap 150 Index Fund: Focused on Investing in Midcap Companies

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The COVID-19 pandemic led to disastrous impact on most economic activities. But the economy is now on its way to recovery even though we are not yet past the pandemic. According to a report by UN Conference on Trade and Development, the Indian economy is now showing decisive signs of a sharp recovery and is expected to rise by 5 percent in 2021.

The factors promoting the economy on recovery track are; unlocking of economic activities post lockdown, liquidity measures from RBI, provisions announced in the Union Budget 2021 for enhanced government spending, sustainable corporate earnings, healthier agricultural performance due various measures towards credit lending and market reforms, etc.

Along with the prospect of a V-shaped economic recovery, there is an underlying opportunity for mid-cap companies to achieve augmented growth in such a favourable economic environment. Mid-cap companies are high-growth potential businesses, and investors looking to profit from a growing economy like India are likely to consider investing in the mid-cap segments of the Indian equity market.

Looking at the market scenario, Aditya Birla Sun Life Mutual Fund has launched Aditya Birla Sun Life Nifty Midcap 150 Index Fund; an open-ended scheme tracking the Nifty Midcap 150 TR Index. On the launch of this fund, Mr A. Balasubramanian MD and CEO of Aditya Birla Sun Life AMC Ltd said, "In the period of economic recovery a broad-based market rally is a favourable period for the mid and small caps to outperform. Adding the cyclical recovery that is being witnessed now also sets a stage for mid and small caps to do well as they have higher exposure to the domestic economy."

Further he added, "The macroeconomic factors like government's encouragement to manufacturing and infrastructure growth through policies such as; Make in India, PLI scheme and Aatmanirbhar Bharat etc. are further bolstering for domestic mid and small cap companies to perform well."

Table 1: Details of Aditya Birla Sun Life Nifty Midcap 150 Index Fund

Type An open ended scheme tracking the Nifty Midcap 150 TR Index Category Index Fund
Investment Objective The investment objective of the Scheme is to provide returns that closely correspond to the total returns of securities as represented by Nifty Midcap 150 Index, subject to tracking errors. The Scheme does not guarantee/indicate any returns. There can be no assurance that the schemes' objectives will be achieved.
Min. Investment Rs 500 and in multiples of Re 1/- thereafter. Additional Purchase Rs. 500/- and in multiples of Re 1/- thereafter. Face Value Rs 10/- per unit
SIP/STP/SWP Available
Plans
  • Direct
  • Regular
Options
  • Growth
  • Dividend
Entry Load Not Applicable Exit Load - For redemption / switch-out of units on or before 90 days from the date of allotment: 0.50% of applicable NAV.
- For redemption / switch-out of units after 90 days from the date of allotment - Nil
Fund Manager Mr Lovelish Solanki Benchmark Index Nifty Midcap 150 Index TRI
Issue Opens March 15, 2021 Issue Closes March 26, 2021
(Source: Scheme Information Document)
 

What will be the Investment strategy for Aditya Birla Sun Life Nifty Midcap 150 Index Fund?

The scheme will implement a passive investment strategy, investing in stocks comprising the underlying index i.e. Nifty Midcap 150 Index TRI and endeavour to monitor and replicate the performance of benchmark index while minimizing the tracking error.

The scheme will not make any judgments about the investment merit of Nifty Midcap 150 Index nor will it attempt to apply any economic, financial or market analysis.

Aditya Birla Sun Life Nifty Midcap 150 Index Fund seeks to provide investors a chance to participate in high growth sunrise sectors largely unrepresented by large caps. By investing midcap companies that could benefit from policy and fiscal incentives it will aim to provide investors long term growth opportunities.

About the benchmark

Nifty Midcap 150 Index represents the next 150 companies based on the market capitalization (ranked 101 - 250) from the Nifty 500, this underlying benchmark index of the scheme measures the performance of mid cap companies.

This Index signifies about 12.9% of the free float market capitalization of the stocks listed on NSE as on March 29, 2019.

The following is the list of Top constituents and sectors under the Index by their weightage as of now:

(Source: NSE Nifty Midcap 150 Index)
 

This scheme apart from investing 95% of its assets in equity & equity related securities constituting the Nifty Midcap 150 Index, it will also invest up to 5% of its assets in debt and money market instruments to meet the liquidity requirements of the scheme.

Under normal circumstances, the asset allocation will be as under:

Table 2: Asset Allocation of Aditya Birla Sun Life Nifty Midcap 150 Index Fund

Instruments Indicative Allocation (% of Net Assets) Risk Profile
Minimum Maximum High/Medium/Low
Equity & Equity related securities constituting the Nifty Midcap 150 Index 95 100 Medium to high
Debt and Money Market Instruments 0 5 Low to Medium
(Source: Scheme Information Document)
 

Who will manage Aditya Birla Sun Life Nifty Midcap 150 Index Fund?

Mr Lovelish Solanki will be the dedicated fund manager for Aditya Birla Sun Life Nifty Midcap 150 Index Fund.

Mr Lovelish Solanki is a Fund Manager at Aditya Birla Sun Life AMC and he has over 10 years of experience in trading and dealing. Prior to this, Mr Solanki was associated with Union KBC Asset Management Co. Ltd. as Equity/Equity derivatives trader and with Edelweiss Asset Management Co. ltd.

His qualification includes, MMS (Finance) and BMS (Finance) and currently schemes under his management are; Aditya Birla Sun Life Equity Savings Fund, Aditya Birla Sun Life Nifty ETF, Aditya Birla Sun Life Arbitrage Fund, Aditya Birla Sun Life Gold Fund, Aditya Birla Sun Life Sensex ETF, Aditya Birla Sun Life Balanced Advantage Fund, Aditya Birla Sun Life Nifty Next 50 ETF, Aditya Birla Sun Life Banking ETF.

Fund Outlook - Aditya Birla Sun Life Nifty Midcap 150 Index Fund

Aditya Birla Sun Life Nifty Midcap 150 Index Fund will invest in securities of the similar composition as the underlying index, to achieve the funds objective of providing returns that closely correspond to the total returns of securities as represented by Nifty Midcap 150 Index, while minimizing the tracking errors.

The scheme offers investors an opportunity to participate in high growth sunrise sectors. The Nifty Midcap 150 index represents variety of sectors, and investors can get access to a well-diversified portfolio of 150 midcap companies that may benefit from government policies and fiscal incentives.

The mid cap segment has outperformed the large cap segment over the long term. However, they are prone to highly volatility during adverse market conditions.

Notably, while index funds are convenient and low cost alternatives for investing in equities, they are not insulated from volatility. Since index funds aim to replicate the performance of the underlying index, they cannot be expected to outperform. The index fund's passive investment approach mitigates the risk that an actively managed mutual fund scheme entails, while providing diversification and a lower expense ratio.

Aditya Birla Sun Life Nifty Midcap 150 Index Fund is suitable for investors looking to earn returns consistent with that of the Nifty Midcap 150 Index. Investors must have a high-risk profile to survive the tides of market volatility with a long-term investment horizon of at least 5-7 years while ensuring that the fund's objective aligns with their own investment objective.

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Warm Regards,
Mitali Dhoke
Jr. Research Analyst

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