Axis Mutual Fund Introduces Axis Nifty Bank Index Fund
May 09, 2024
Axis Mutual Fund has introduced the Axis Nifty Bank Index Fund, an open-ended index fund tracking the Nifty Bank Total Return Index (TRI).
The Nifty Bank Index comprises the most liquid and large Indian banking stocks. It provides investors and market intermediaries a benchmark that captures the capital market performance of the Indian banks. The Index comprises of maximum 12 companies listed on the National Stock Exchange of India (NSE).
Table: Top Constituents of Nifty Bank Index
(Source: NSE Indexogram Factsheet as of April 2024)
In other words, the passively managed Axis Nifty Bank Index Fund provides investors the opportunity to have some of the leading Indian banks. It provides access to 12 private and public sector banks. However, the Scheme will not invest in derivatives.
The Scheme shall invest in stocks forming part of the underlying Index in the same ratio as per the index to the extent possible and to that extent follow a passive investment strategy, except to the extent of meeting liquidity and expense requirements.
Events like the constituent stocks becoming illiquid in the cash market, the exchange changing the constituents, a large dividend going ex but lag in its receipts, etc. may increase the tracking error. That said, the Scheme will endeavour to minimise the tracking error. Tracking error is a measure of the difference in returns from the Scheme and the returns from the index. It is computed as the standard deviation of the difference between the daily returns of the underlying benchmark and the NAV of the Scheme on an annualized basis.
To meet liquidity and expense requirements, Axis Nifty Bank Index Fund may allocate a small portion of up to 5% in debt & money market instruments. Money Market instruments include commercial papers, commercial bills, treasury bills, Tri-party repo, Government securities having an unexpired maturity of up to one year, call or notice money, certificate of deposit, usance bills, and any other like instruments as specified by the Reserve Bank of India (RBI) from time to time.
The main objective of Axis Nifty Bank Index Fund is to provide returns before expenses that correspond to the total returns of the Nifty Bank TRI subject to tracking errors. However, there is no assurance that the investment objective of the Scheme will be achieved. The benchmark of the Scheme is the Nifty Bank TRI.
The Indian banking sector stands as a beacon of stability and resilience with prudent regulatory policy and environment.
From a sector weight of 27% in 2014, the sector weight of the banking & financial sector has risen to 34% in 2024 (as of March 31, 2024).
Graph 1: Long-Term Performance of Nify Bank TRI v/s. Nifty 50 TRI
Values normalized to 100 as on January 1, 2000, in the graph.
CAGR Returns from January 1, 2000, to March 31, 2024.
The performance figures pertain to the index and do not in any manner indicate the returns/performance of the scheme.
Past performance may or may not be sustained in the future.
Source: NSE, Axis MF Research
(Source: Axis Mutual Fund Presentation)
The Banking & Financial Sector has consistently outperformed other sectors and the Nifty 50 TRI. The under-penetration of credit, robust credit growth, digital infrastructure and a flourishing ecosystem have resulted in the Nifty Bank Index's contribution to the wealth creation for investors.
Graph 2: Y-o-Y Performance of Nifty Bank TRI v/s Nifty 50 TRI
The performance figures pertain to the index and do not in any manner indicate the returns/performance of the scheme.
Past performance may or may not be sustained in the future.
Source: NSE, Axis MF Research
(Source: Axis Mutual Fund Presentation)
The graph above shows that the Nifty Bank TRI has outperformed the Nifty 50 TRI in 6 out of 10 calendar years in the past. With banking & financial services a key driver of economic growth, digitisation and financial inclusion, and a conducive regulatory environment, this sector is possibly poised for further growth.
Mr. B Gopkumar, MD and CEO of Axis Mutual Fund, in a press release, said:
"India's economic rise is a compelling narrative driven by several factors. If addressed effectively, our growth story has the potential to propel the nation toward becoming a major global economic power. Against this backdrop, India's banking sector continues to exhibit growth and resilience. Fuelled by robust regulatory frameworks and the rapid adoption of digital banking, the sector is well-positioned for sustained expansion."
The Axis Nifty Bank Index Fund will be managed by Mr. Karthik Kumar, who holds a mechanical engineering degree (B.E. - Mechanical), is an MBA, and is a CFA Charter holder. His total years of work experience is 10 years and has been with Axis Asset Management Company since June 2019. Before that, he was Silver Tree Hong Kong Ltd. and Asiya Investment, Hong Kong.
The scheme is available for subscription during the New Fund Offer (NFO) period from May 3, 2024, to May 17, 2024, and has both Regular Plan and Direct Plan options for investment. The minimum investment amount is Rs 500/- and in multiples of Re 1 thereafter. In the case of the Systematic Investment Plan (SIP) mode, the minimum amount and SIP instalments are as under:
(Source: Scheme Information Document)
Note if you are considering investing in this scheme, make sure your risk appetite is very high and an investment horizon of around 7 to 8 years as your investment will be concentrated in the banking & financial services sector.
To know more about Axis Nifty Bank Index Fund download and read the Scheme Information Document and Key Information Memorandum.
Happy Investing!