Healthcare is one of the country’s fastest-growing sectors that contributes to GDP growth. The key growth drivers of the healthcare sector are rising incomes that drive the growth of high-end medical services, increasing awareness, and increased access to insurance; all this suggests that the healthcare sector will note robust growth in the long run.
India ranked #10th out of the top 46 countries for medical tourism. India’s doctor-population ratio and bed density ratio vis-a-vis other economies are relatively lower, indicating strong growth potential. In addition, the Healthcare sector will be aided by increased government policies. On the back of rapid digitisation and increased government support, India’s e-Health market, which includes teleconsulting, e-pharmacies, e-diagnostics and online fitness, and wellness, is estimated to flourish in the near term.
The pandemic made us realise the value of a robust healthcare system; it has been historically proven that the wealth of a nation relies on the health of its citizens. With the vast universe of pharma and healthcare stocks to choose from, passive investing in an ETF model that benefits from the growing opportunities in this healthcare sector can be a good option for investors.
Looking at the investor sentiment and with the approach ‘to create wealth invest in health,’ Motilal Oswal Mutual Fund has launched Motilal Oswal S&P BSE Healthcare ETF. It is an open-ended scheme replicating/tracking the S&P BSE Healthcare Total Return Index.
On the launch of this NFO, Mr Navin Agarwal, MD & CEO at Motilal Oswal Asset Management Company Ltd., said, “At Motilal Oswal AMC, we target to provide options of passive funds across key segments. The healthcare industry has grown 14x in the past 14 years and may continue growing rapidly on the back of increased insurance adoption, medical tourism, and rising incomes. The pandemic has reinforced the importance of healthcare facilities in India. Government’s plan to ramp up spending and provide healthcare facilities to the economically weaker section will also boost the domestic healthcare sector.”
Table 1: Details of Motilal Oswal S&P BSE Healthcare ETF
| Type | An open-ended scheme replicating/tracking the S&P BSE Healthcare Total Return Index. | Category | Exchange Traded Fund |
| Investment Objective | The investment objective of the scheme is to provide returns that, before expenses, correspond to the total returns of the securities as represented by the S&P BSE Healthcare Total Return Index, subject to tracking error. However, there is no guarantee or assurance that the investment objective of the scheme will be achieved. |
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| 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 Swapnil Mayekar – Mr Abhiroop Mukherjee |
Benchmark Index | S&P BSE Healthcare Total Return Index |
| Issue Opens: | July 14, 2022 | Issue Closes: | July 22, 2022 |
(Source: Scheme Information Document)
The investment strategy for Motilal Oswal S&P BSE Healthcare ETF will be as follows:
Motilal Oswal S&P BSE Nifty Healthcare ETF will follow a passive investment strategy and seek to invest in the constituents of the S&P BSE Healthcare Index in the same proportion (weights) as the index and track the benchmark index.
The investment strategy would involve offering investment returns that are similar to the total returns of the S&P BSE Healthcare Total Return Index before fees/expenses and subject to tracking errors. The endeavour will be to reduce the tracking error to the least possible point 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.
The scheme aims to invest in the constituent of the S&P BSE Healthcare Total Return Index in the range of 95% to 100%. The scheme would also invest in units of Liquid/debt schemes, debt and money market instruments, in the range of 0% to 5%.
Under normal circumstances, the asset allocation will be as under:
Table 2: Asset Allocation for Motilal Oswal S&P BSE Healthcare ETF
| Instruments | Indicative Allocation (% of net assets) | Risk Profile | |
| Minimum | Maximum | High/Medium/Low | |
| Constituents of S&P BSE Healthcare Total Return Index | 95 | 100 | Very High |
| Units of Liquid/debt schemes, debt and money market instruments | 0 | 5 | Low |
(Source: Scheme Information Document)
About the benchmark
The S&P BSE Healthcare index is designed to provide investors with a benchmark reflecting companies included in the S&P BSE AllCap that are classified as members of the healthcare sector. S&P BSE Healthcare Index has outperformed against S&P BSE All Cap Index in 8 out of the last 14 calendar years.
Here’s the list of top 10 constituents by weightage and sector representation under the index as of June 30, 2022:
(Source: Motilal Oswal S&P BSE Healthcare ETF Product Presentation)
Note that the index rebalancing is undertaken annually in September.
Who will manage Motilal Oswal S&P BSE Healthcare ETF?
Mr Swapnil Mayekar and Mr Abhiroop Mukherjee will be the dedicated fund managers for this scheme.
Mr Swapnil Mayekar will be managing the equity portion of the portfolio. He has over 11 years of experience in fund management and product development and has completed a Master of Commerce in (Finance Management). Prior to joining Motilal Oswal Asset Management Company Ltd., he was associated with Business Standard as Research Associate.
At Motilal Oswal AMC, Mr Mayekar currently manages Motilal Oswal Nasdaq 100 Fund of Fund, Motilal Oswal Nifty Bank Index Fund, Motilal Oswal Nifty 500 Fund, Motilal Oswal Nifty Midcap 150 Index Fund, Motilal Oswal Nifty Small cap 250 Index Fund, Motilal Oswal Midcap 100 ETF, Motilal Oswal M50 ETF, Motilal Oswal Nifty 50 Index Fund, and Motilal Oswal Nifty Next 50 Index Fund.
Mr Abhiroop Mukherjee will be managing the debt component of the portfolio. He is a B. Com (Honours) graduate, holds PGDM (Finance) degree, and has over 13 years of experience in Debt and Money Market Instruments, Securities trading, and fund management. Before joining Motilal Oswal AMC as Associate Vice President – Debt and Money Market Instruments, he has worked with PNB Gilts Ltd. as an Assistant Vice President – Debt and Money Market Instruments.
At Motilal Oswal AMC, Mr Mukherjee currently manages Motilal Oswal Ultra Short Term Fund, Motilal Oswal Liquid Fund, Motilal Oswal 5 Year G -Sec ETF, Motilal Oswal 5 Year Gsec Fund of Fund, Motilal Oswal Focused 25 Fund, Motilal Oswal Midcap 30 Fund, Motilal Oswal Flexicap Fund, Motilal Oswal Long Term Equity Fund, Motilal Oswal Dynamic Fund, Motilal Oswal Nasdaq Fund of Fund, Motilal Oswal Equity Hybrid Fund, Motilal Oswal S&P 500 Index Fund, Motilal Oswal Asset Allocation Passive Fund of Fund – Conservative, Motilal Oswal Asset Allocation Passive Fund of Fund – Aggressive, Motilal Oswal MSCI EAFE Top 100 Index Fund, and Motilal Oswal NASDAQ Q 50 ETF
Fund Outlook – Motilal Oswal S&P BSE Healthcare ETF
Motilal Oswal S&P BSE Healthcare ETF aims to provide returns that closely correspond to the total returns as represented by the S&P BSE Healthcare Index, subject to tracking errors.
An ETF based on the Healthcare Index, offering the benefits of both mutual fund and stock trading, can be a good option to capitalise on the potential growth of the healthcare sector. Healthcare is one of the fastest growing sectors in India and has strong tailwinds, such as rising healthcare awareness among citizens. The underlying S&P BSE Healthcare Index has a healthy mix of large mid and small-cap stocks.
At present, the index is composed of 97 constituents spanning pharmaceuticals, hospitals, diagnostic, medical equipment etc. This covers more than 99% of the listed Healthcare universe in terms of market capitalisation. This offers investors an opportunity to gain optimal returns from the growth potential of the healthcare sector through this scheme.
The passive investment strategy makes this fund available at lower costs and eliminates the risk of active stock selection and fund managers’ biases. However, this scheme is a sector-oriented ETF that will aim to invest only in the healthcare sector, which creates a concentration risk. Additionally, the persistent repercussions of the Russia-Ukraine conflict, rising interest rates, and spiralling inflation are all issues that represent a significant risk to economic growth and are the root cause of the prevailing high market volatility.
These factors, among many others, could have a bearing on the scheme’s performance and may affect negatively if the sector moves out of favour. Thus, being a sectoral-ETF, this scheme is a high-risk, high-return investment proposition and suitable only for high-risk investors with at least 5-7 years of the investment horizon.
This article first appeared on PersonalFN here
