If the foundation of a house is not strong enough it might collapse. Similarly, a strong infrastructure is necessary for the overall development of a modern economy. Roads, railways, electricity, and banking services are the very bricks on which the modern economy is built. Until and unless a nation has a robust infrastructure, other industries/sectors will find it difficult to grow and prosper.
For any growing economy, investments in infrastructure are the key to future growth. It is estimated that high-quality infrastructure in the form of quality roads, highways, inland waterways, ports and airports will boost GDP growth. Infrastructure is the key driver for the Indian economy and is highly responsible for propelling India’s overall development.
India is the second most populous country in the world which makes it necessary to expand its infrastructure. The increasing impetus to develop infrastructure in the country is attracting both domestic and international players. Intense focus from the government ensures the creation of world-class infrastructure in India. Many investors are willing to be a part of this economic transformation by investing in the infrastructure sector.
The Nifty Infrastructure Index measures the performance of the top 30 companies in the infrastructure sector. Investors may consider investing in this index to benefit from the growth potential of companies engaged in various infrastructure segments and get a holistic view of the infrastructure sector.
ICICI Prudential Mutual Fund has launched ICICI Prudential Nifty Infrastructure ETF to seize this opportunity in infrastructure sector and gain optimal returns by investing in the key driver of the economy. It is an open-ended exchange-traded fund tracking the Nifty Infrastructure Index. This scheme reflects the performance of companies that belong to the infrastructure industry e.g. Telecom, Power, Port, Roads, Air, Railways, Shipping, and other Utility service provider companies.
Table 1: Details for ICICI Prudential Nifty Infrastructure ETF
| Type | An open-ended Exchange Traded Fund tracking Nifty Infrastructure Index | Category | Exchange-Traded Fund |
| Investment Objective | The investment objective of the scheme is to provide returns before expenses that closely correspond to the total return of the underlying index subject to tracking errors. However, there can be no assurance or guarantee that the investment objective of the Scheme would be achieved. | ||
| Min. Investment | Rs 5,000/- and in multiples of Re 1 thereafter. | Face Value | Rs 10/- per unit |
| Entry Load | Not Applicable | Exit Load | Nil |
| Fund Manager | Mr Kayzad Eghlim Mr Nishit Patel |
Benchmark Index | Nifty Infrastructure TRI |
| Issue Opens: | August 05, 2022 | Issue Closes: | August 17, 2022 |
(Source: Scheme Information Document)
The investment strategy for ICICI Prudential Nifty Infrastructure ETF will be as follows:
ICICI Prudential Nifty Infrastructure ETF will predominantly invest in stocks constituting the underlying index in the same proportion as in the Index and endeavour to track the benchmark index.
The investment strategy revolves around investing in the underlying Nifty Infrastructure index to create a well-diversified portfolio of companies representing the Infrastructure sector which includes companies belonging to Telecom, Power, Port, Air, Roads, Railways, shipping and other Utility Service providers.
The performance of the scheme may not be commensurate with the performance of the underlying index on any given day or over any given period. Such variations are commonly referred to as tracking errors. The fund intends to maintain a low tracking error by closely aligning the portfolio in line with the index. The stocks comprising the underlying index are periodically reviewed by Index Service Provider.
The portfolio shall be rebalanced within 7 calendar days to ensure adherence to the asset allocation norms of the Scheme. Similarly, in the event of a constituent stock being demerged/merged/delisted from the exchange or due to a major corporate action in a constituent stock, the fund may have to reallocate the portfolio and seek to minimize the variation from the index.
In such events, it may be more prudent for the fund to take exposure through derivatives of the index itself or its constituent stocks to minimize the long-term tracking error. A very small portion (0-5% of the Net Assets) of the fund may be kept liquid to meet the liquidity and expense requirements.
Under normal circumstances, the asset allocation will be as under:
Table 2: Asset Allocation for ICICI Prudential Nifty Infrastructure ETF
| Instruments | Indicative Allocation (% of net assets) | Risk Profile | |
| Minimum | Maximum | High/Medium/Low | |
| Equity and Equity related securities of companies constituting the underlying index (Nifty Infrastructure Index) | 95 | 100 | Medium to High |
| Money market instruments including TREPs*# | 0 | 5 | Low to Medium |
*Or similar instruments as may be permitted by SEBI/RBI from time to time, subject to requisite approvals from SEBI/RBI, as applicable.
# Excluding subscription money in transit before deployment/payout
(Source: Scheme Information Document)
About the benchmark
NIFTY Infrastructure Index includes 30 companies listed on the National Stock Exchange of India (NSE) belonging to Telecom, Power, Port, Air, Roads, Railways, shipping and other Utility Services providers. Weights of constituents of the NIFTY Infrastructure index are capped at 20%.
NIFTY Infrastructure Index is computed using the free float market capitalization method, wherein the level of the index reflects the total free float market value of all the stocks in the index relative to a particular base market capitalization value.
Here’s the list of top 10 constituents by their weightage and sector representation as of July 29, 2022:
(Source: ICICI Prudential Nifty Infrastructure ETF PPT)
Note, that the index will rebalance semi-annually in March and September.
Who will manage ICICI Prudential Nifty Infrastructure ETF?
Mr Kayzad Eghlim and Mr Nishit Patel will be the designated fund managers for this scheme.
Mr Kayzad Eghlim has more than 30 years of experience in financial services, and he holds an MBA, M. Com, and B. Com degree. Before joining ICICI Pru AMC, he was associated with IDFC Investment Advisors Ltd. as Dealer – Equities; Prime Securities as a Manager; Canbank Mutual Fund (IS Himalayan Fund) as a Fund Manager; and Canbank Mutual Fund as Equity Dealer assisting the Fund Manager. He worked with the Primary Market Department (IPO) at the beginning of his career.
At ICICI Pru AMC, Mr Kayzad currently manages ICICI Prudential Equity – Arbitrage Fund, ICICI Prudential Nifty 100 ETF, ICICI Prudential Nifty Next 50 Index Fund, ICICI Prudential Nifty ETF, ICICI Prudential NV20 ETF, ICICI Prudential Sensex ETF, ICICI Prudential Nifty Index Fund, ICICI Prudential Equity Savings Fund, ICICI Prudential Nifty Low Vol 30 ETF, BHARAT 22 ETF, ICICI Prudential S&P BSE 500 ETF, ICICI Prudential Nifty Next 50 ETF, ICICI Prudential Bharat 22 FOF, ICICI Prudential Bank ETF, ICICI Prudential Midcap Select ETF, ICICI Prudential Midcap 150 ETF, ICICI Prudential Alpha Low Vol 30 ETF, ICICI Prudential IT ETF,ICICI Prudential Nifty Low Vol 30 ETF, ICICI Prudential Healthcare ETF, ICICI Prudential FMCG ETF, ICICI Prudential Consumption ETF, ICICI Prudential Smallcap Index Fund, ICICI Prudential Private Banks ETF, ICICI Prudential Silver ETF Fund of Fund, and ICICI Prudential Nifty Auto ETF.
Mr Nishit Patel joined ICICI Prudential Asset Management Company Limited in November 2018 and was working under ETF Business. He is a Chartered Accountant and B. Com graduate. At ICICI Pru AMC, Mr Patel currently manages ICICI Prudential Midcap Select ETF, ICICI Prudential Nifty 100 ETF, ICICI Prudential Nifty Next 50 Index Fund, ICICI Prudential Nifty ETF, ICICI Prudential NV20 ETF, ICICI Prudential Sensex Index Fund, ICICI Prudential Nifty Index Fund, ICICI Prudential Regular Gold Savings Fund (FOF), ICICI Prudential Gold ETF, ICICI Prudential Sensex ETF, ICICI Prudential S&P BSE 500 ETF, ICICI Prudential BHARAT 22 FOF, ICICI Prudential Nifty Next 50 ETF, ICICI Prudential Bank ETF, ICICI Prudential Private Banks ETF, ICICI Prudential Midcap 150 ETF, ICICI Prudential Alpha Low Vol 30 ETF, BHARAT 22 ETF, ICICI Prudential IT ETF, ICICI Prudential Nifty Low Vol 30 ETF, ICICI Prudential FMCG ETF, ICICI Prudential Healthcare ETF, ICICI Prudential Consumption ETF, ICICI Prudential Smallcap Index Fund, ICICI Prudential Silver ETF Fund of Fund, ICICI Prudential Passive Multi-Asset Fund of Funds and ICICI Prudential Nifty Auto ETF.
Fund Outlook – ICICI Prudential Nifty Infrastructure ETF
ICICI Prudential Nifty Infrastructure ETF aims to invest in securities that represent various segments of the Infrastructure sector and comprise the Nifty Infrastructure Index. The scheme endeavours to provide returns that closely correspond to the underlying index, subject to tracking errors.
The scheme aims to provide potential broad exposure to the key infrastructure segments of the Indian economy and diversification to investors’ portfolios. It allows investors to benefit from the growth of the infrastructure sector, and developing infrastructure in the country is attracting both domestic and international businesses.
The Indian government plans to spend USD 1.4 trillion during 2019 – 2023 on infrastructure, suggesting that this sector will keep growing. Several government initiatives and the recent performance exhibit an overall positive outlook of the Infrastructure sector. The private sector is an emerging key player across various infrastructure segments, ranging from communications to power to roads and airports. Infrastructure is crucial to a country’s economic growth regardless of what stage the economy is in making it a non-cyclical sector.
Although the scheme provides a relatively low-cost and rule-based investment approach to exposure to infrastructure themes, it is still prone to high market risks. Being a sectoral ETF, the scheme will focus on investing in companies only under the infrastructure segment which creates concentration risk. In addition, the persistent repercussions of the Russia-Ukraine conflict, rising interest rates, and spiralling inflation may pose a significant risk to economic growth and the infrastructure sector may remain under pressure. While India aims to expand its infrastructure, the right macro-economic environment is necessary. These factors, among many others, may affect the performance of the underlying index and its top constituents and impact the scheme’s portfolio negatively if the sector moves out of favour.
The fortune of ICICI Prudential Nifty Infrastructure ETF depends on the performance of the underlying index. This passively managed sectoral ETF is a high-risk high-return investment proposition, suitable for investors possessing a decent understanding of the infrastructure segment with a high-risk profile and a long investment horizon of over 5-7years.
This article first appeared on PersonalFN here
