Information Technology has become the backbone of almost all economic and social activities, right from shopping to dining, schooling to working from home, banking to socializing, etc. All these task are performed conveniently today due to the advancements in technology. The pandemic circumstances coupled with increasing policy support has shown positive impact on the IT sector. Moreover, India is home to large number of tech-based UNICORN start-ups and several companies who are the market leaders in IT sector.
When it comes to investing, IT sector has gained more traction post pandemic. Considering the booming growth of IT and IT related sectors, many investors are seeking to invest in IT companies in order to participate in the growth opportunity. An exchange-traded fund that tracks the IT sector can be a good option for investors looking to gain decent returns from a passively managed fund.
Looking at the investor sentiment, Aditya Birla Sun Life Mutual Fund has launched Aditya Birla Sun Life Nifty IT ETF. It is an open-ended exchange traded fund tracking the Nifty IT TRI.
On the launch of this fund Mr A. Balasubramanian, Managing Director & CEO at Aditya Birla Sun Life AMC said, “Over the years, India has established itself as a preferred destination for IT & Business Process Management services, with the sector contributing almost 44% of FDI inflows in India in 2021 (Source: Gartner, Indian Brand Equity Foundation (IBEF) / As on August 2021). It is estimated that the Indian IT sector has the potential of becoming a $350 billion industry in annual revenues by 2025 as per a report by Nasscom. The Government is also incentivising the sector by not only fast-tracking Digital India initiative but also introducing schemes like Meity, SAMRIDH and PLI. All this will significantly benefit the sector.”
He added further, “Amid the pandemic, the sector demonstrated its defensive nature by reporting strong business growth, and also gave stellar returns. With India being on track to become a Global Hub of IT, Aditya Birla Sun Life IT ETF allows investors to tap into the growth potential of the top IT companies.
Table 1: Details of Aditya Birla Sun Life Nifty IT ETF
| Type | An open-ended exchange traded fund tracking Nifty IT TRI | Category | Exchange Traded Fund |
| Investment Objective | The investment objective of the scheme is to provide returns that before expenses, closely correspond to the total returns of securities as represented by Nifty Information Technology TRI, subject to tracking errors. However, the performance of scheme may differ from that of the underlying index due to tracking error. 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 Rs 100/- and in multiples of Re 1 thereafter | Face Value | Rs 10/- per unit |
| Entry Load | Not Applicable | Exit Load | Nil |
| Fund Manager | – Mr Lovelish Solanki – Mr Kedarnath Mirajkar |
Benchmark Index | Nifty IT TRI |
| Issue Opens: | October 20, 2021 | Issue Closes: | October 28, 2021 |
(Source: Scheme Information Document)
The investment strategy for Aditya Birla Sun Life Nifty IT ETF will be as follows:
Aditya Birla Sun Life Nifty IT ETF will follow a passive management strategy. It will predominantly invest in stocks comprising the Nifty IT TRI in a similar proportion. The scheme aims to track the underlying index and invest in its constituents to gain returns corresponding to the Nifty IT index.
The investment strategy would revolve around reducing the tracking error to the least possible through regular rebalancing of the portfolio, taking into account the change in weights of stocks in the index, as well as the incremental collections / redemptions in the scheme.
Being an exchange-traded fund, the scheme will only invest in the securities constituting the underlying index. The Scheme may also invest in debt/ money market instruments, in compliance with Regulations to meet liquidity and expense requirements.
Rebalancing of the scheme shall also be carried out whenever there is a change in the underlying index or any change due to corporate action with respect to the constituents of the underlying index within 7 days.
About the benchmark
The NIFTY IT Index comprises of 10 companies listed on the National Stock Exchange (NSE) and captures the performance of the Indian IT companies.
The NIFTY IT index is computed using free float market capitalization method with a base date of Jan 1, 1996 indexed to a base value of 1,000 wherein the level of the index reflects total free float market value of all the stocks in the index relative to a particular base market capitalization value.
The following is the list of top 10 constituents under the index by their weightage as of September 30, 2021:
(Source: NSE Nifty IT Index)
Under normal circumstances, the asset allocation of the scheme will be as under:
Table 2: Asset Allocation for Aditya Birla Sun Life Nifty IT ETF
| Instruments | Indicative Allocation (% of net assets) | Risk Profile | |
| Minimum | Maximum | High/Medium/Low | |
| Equity & Equity related instruments constituting Nifty IT TRI | 95 | 100 | Medium to High |
| Cash, Money Market & Debt instruments | 0 | 5 | Low |
(Source: Scheme Information Document)
Who will manage Aditya Birla Sun Life Nifty IT ETF?
Mr Lovelish Solanki and Mr Kedarnath Mirajkar will be the dedicated fund managers for this scheme.
Mr Lovelish Solanki is a Fund Manager at Aditya Birla Sun Life AMC Limited. His qualifications are MMS (Finance) and BMS (Finance). He has an overall experience of over 10 years in Trading and Dealing. Prior to this, he was associated with Union KBC Asset Management Co Limited as Equity /Equity Derivatives – Trader and Edelweiss Asset Management Co. Ltd.
Among other schemes, Mr Solanki manages Aditya Birla Sun Life Index Fund, Aditya Birla Sun Life Arbitrage Fund, Aditya Birla Sun Life Gold ETF, Aditya Birla Sun Life Nifty ETF, Aditya Birla Sun Life Gold Fund, Aditya Birla Sun Life Balanced Advantage Fund, Aditya Birla Sun Life Equity Savings Fund, Aditya Birla Sun Life Sensex ETF, Aditya Birla Sun Life Nifty Next 50 ETF, Aditya Birla Sun Life Banking ETF, Aditya Birla Sun Life Nifty Smallcap 50 Index Fund, Aditya Birla Sun Life Nifty Midcap 150 Index Fund, Aditya Birla Sun Life Nifty 50 Equal Weight Index Fund.
Mr Kedarnath Mirajkar is Dealer Equity – Index and ETF at Aditya Birla Sun Life AMC Limited. He has an overall work experience of over 14 years and his qualification includes Post Graduate Diploma in Business Management – Finance. Prior to this, he was associated with ABSLAMC since April 2010 and has worked in Operations and Risk functions. He was responsible for trade settlement, valuation of securities and monitoring of regulatory limits.
Among other schemes, Mr Mirajkar manages Aditya Birla Sun Life Index Fund, Aditya Birla Sun Life Gold ETF, Aditya Birla Sun Life Nifty ETF, Aditya Birla Sun Life Sensex ETF, Aditya Birla Sun Life Nifty Next 50 ETF, Aditya Birla Sun Life Banking ETF, Aditya Birla Sun Life Nifty Smallcap 50 Index Fund, Aditya Birla Sun Life Nifty Midcap 150 Index Fund, Aditya Birla Sun Life Nifty 50 Equal Weight Index Fund.
Fund Outlook – Aditya Birla Sun Life Nifty IT ETF
Aditya Birla Sun Life Nifty IT ETF aims to provide returns that closely correspond to the total returns as represented by the NIFTY IT Total Return Index, subject to tracking errors.
The scheme offers investors access to the best of a Global IT hub, invest in the future with portfolio exposure to top IT companies of the booming Indian IT sector. It holds the potential for long-term capital growth by investing in the fastest growing sector.
The passive investment strategy makes this fund available at lower costs and with lower active stock selection risk. Being an exchange traded fund, it provides reasonable liquidity with ease of investing, and its units can be easily bought and sold at real-time prices on the exchange.
This scheme is a sector-oriented ETF that will aim to invest only in Information technology sector, which creates a concentration risk. If the sector goes out of favour, your portfolio performance will be negatively affected. Hence, this makes Aditya Birla Sun Life Nifty IT ETF a risky investment proposition. Notably, sectoral funds have a high-risk high-return investment approach.
Thus, Aditya Birla Sun Life Nifty IT ETF is suitable only for aggressive investors with high-risk tolerance, who have a better understanding of the IT sector and are seeking to benefit from its growth potential. More importantly, they should have an investment horizon of at least 5-7 years.
This article first appeared on PersonalFN here
