{"id":917,"date":"2019-08-19T13:06:55","date_gmt":"2019-08-19T13:06:55","guid":{"rendered":"http:\/\/blog.certifiedfinancialguardian.com\/?p=917"},"modified":"2019-08-19T13:06:58","modified_gmt":"2019-08-19T13:06:58","slug":"is-tata-nifty-private-bank-exchange-traded-fund-right-investment-option-in-current-times","status":"publish","type":"post","link":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/2019\/08\/19\/is-tata-nifty-private-bank-exchange-traded-fund-right-investment-option-in-current-times\/","title":{"rendered":"Is Tata Nifty Private Bank Exchange Traded Fund Right Investment Option In Current Times?"},"content":{"rendered":"\n

Tata Mutual Fund<\/a> has launched another exchange-traded fund, Tata Nifty Private Bank Exchange Traded Fund (TNPBETF), after Tata Nifty Exchange Traded Fund<\/a>.<\/p>\n\n\n\n

TNPBETF being an open-ended ETF is a passively managed fund that will\nreplicate its benchmark index, i.e. the Nifty Private Bank Index. <\/p>\n\n\n\n

Usually, an ETF provides an opportunity to invest across the entire market cap on a real-time basis at lower costs, hence globally they are popular. The key benefit of an ETF over traditional open-ended index funds is liquidity and availability of real-time market price on a stock exchange. They can be bought and sold on the exchange at prices that are usually close to the indicative intra-day Net Asset Value (NAV)<\/a> of the Scheme.<\/p>\n\n\n\n

Tata Mutual fund is of the view that the\nIndian economy is at a critical juncture of its evolution. There are\nexpectations of rapid growth, inclusive growth, wealth creation, trickle-down\nof wealth, better living standards, quality infrastructure & access to\nbasic banking facilities. <\/p>\n\n\n\n

Private banks will be able to leverage their\nexpertise & established market positions to grow their retail books and\nexpand services ranging from plastic money to diversified financial services\nthat will allow them to outperform the market.<\/p>\n\n\n\n

Due to this in consumer lending space in\nIndia, the organized lenders have a huge opportunity and Tata Nifty Private\nBank ETF will allow investors to tap into the Indian Private Retail and\nCorporate Banking Sector. <\/p>\n\n\n\n

However, given that the Nifty Private Bank index is a purely equity-based index, it is suitable for investors who have the stomach for high risk and an investment time horizon of at least 5 years, should consider TNPBETF.<\/p>\n\n\n\n

[Read<\/strong>: Why Comparing Returns to Risk Is More Meaningful!<\/a>]<\/p>\n\n\n\n

 <\/em>Table 1: Details of Tata Nifty Private Bank Exchange Traded\nFund<\/em><\/strong><\/p>\n\n\n\n

\n Type<\/strong>\n <\/td>An open-ended Exchange Traded Fund replicating\/tracking Nifty Private Bank Index<\/td>\n Category<\/strong>\n <\/td>Exchange-Traded Fund<\/td><\/tr>
\n Investment Objective<\/strong>\n <\/td>\n To provide returns that is closely correspond to the total returns of the securities as represented by the Nifty Private Bank index, subject to tracking error.

\n However, there is no assurance or guarantee that the investment objective of the Scheme will be achieved.\n <\/td><\/tr>
\n Min. Investment<\/strong>\n <\/td>\n Rs 5,000 and in multiples of Re 1 thereafter\n <\/td>\n Face Value<\/strong>\n <\/td>Rs 10 per unit<\/td><\/tr>
\n Entry Load<\/strong>\n <\/td>Nil<\/td>\n Exit Load<\/strong>\n <\/td>Nil\n <\/td><\/tr>
\n Fund Manager<\/strong>\n <\/td>Mr Sailesh Jain<\/td>\n Benchmark Index<\/strong>\n <\/td>Nifty Private Bank Index<\/td><\/tr>
\n Issue Opens<\/strong>\n <\/td>16 August, 2019<\/td>\n Issue Closes:<\/strong>\n <\/td>29 August, 2019\n<\/td><\/tr><\/tbody><\/table><\/center>\n\n\n\n

(Source: Scheme Information Document<\/a>)<\/p>\n\n\n\n

How will the scheme allocate its assets?<\/strong><\/p>\n\n\n\n

Under normal\ncircumstances, it is anticipated that the asset allocation of the Tata Nifty\nPrivate Bank ETF will be as follows:<\/p>\n\n\n\n

Table\n2: TNPBETF \u2019s Asset Allocation<\/em><\/strong><\/em><\/p>\n\n\n\n

\n Instruments<\/strong>\n <\/td>\n Indicative Allocation (% of Total Assets)<\/strong>\n <\/td>\n Risk\n Profile<\/strong>\n <\/td><\/tr>
\n Minimum<\/strong>\n <\/td>\n Maximum<\/strong>\n <\/td>\n High\/\n Medium\/ Low<\/strong>\n <\/td><\/tr>
\n Equity and Equity related instruments covered by Nifty Private Bank index*\n <\/td>95<\/td>100<\/td>\n High\n <\/td><\/tr>
\n Money Market Instruments including Triparty repo, or any other instrument as may be permitted by SEBI and units of the liquid scheme of Mutual Fund\n <\/td>0<\/td>\n 5<\/td>Low<\/td><\/tr>\n\t<\/tbody><\/table><\/center>\n\n\n\n

The net assets of the\nscheme will be invested predominantly in stocks constituting the Nifty Private\nBank Index. This would be done by investing in all the stocks in approximately\nthe same weightage that they represent in the Nifty Private Bank Index. The scheme\nmay take exposure through derivative transactions in the manner and up to the\nlimit as may be specified by SEBI from time to time. A small portion of the net\nassets will be invested in money market instruments permitted by SEBI \/ RBI to\nmeet the liquidity requirements of the Scheme.

\n*The scheme may invest up to 50% of its net assets in equity derivative instruments. Exposure to equity derivatives of the index itself or its constituent stocks may be undertaken when equity shares are unavailable, insufficient or for rebalancing in case of corporate actions for a temporary period. The cumulative gross exposure through equity, debt and derivative positions shall not exceed 100% of the net assets of the scheme.<\/p>\n\n\n\n

(Source: Scheme Information Document<\/a>)<\/p>\n\n\n\n

What Investment Strategy\nwill the Scheme follow?<\/strong><\/p>\n\n\n\n

Tata Nifty Private Bank Exchange Traded\nFund is a passively managed exchange-traded fund which will employ an\ninvestment approach designed to track the performance of Nifty Private Bank\nIndex. The Scheme seeks to achieve this goal by investing in securities\nconstituting the Nifty Private Bank Index in the same proportion as in the\nIndex. <\/p>\n\n\n\n

The Scheme will invest at least 95% of its\ntotal assets in the securities comprising the underlying Index. The Scheme may\nalso invest in money market instruments to meet the liquidity and expense\nrequirements.<\/p>\n\n\n\n

The AMC would monitor the tracking error (a\nmeasure of the difference in returns from the Scheme and the returns from the\nindex) of the Scheme on an ongoing basis and would seek to minimize tracking\nerror to the maximum extent possible. Under normal market circumstances, such\ntracking error is not expected to exceed the range of 2%-3% p.a. <\/p>\n\n\n\n

However, in case of events like dividend\nissuance by constituent members, rights issuance by constituent members, and\nmarket volatility during rebalancing of the portfolio following the rebalancing\nof the Underlying Basket, etc. or in abnormal market circumstances, the\ntracking error may exceed the above limits. <\/p>\n\n\n\n

The Scheme will endeavour to minimise the\ntracking error by: <\/p>\n\n\n\n