Axis mutual fund recently announced the launch of Axis Nifty Midcap 50 Index Fund NFO. This open-ended index fund will be available for investment from March 10, 2022, up to March 21, 2022. The fund will be passively managed by Jignesh Gopani and will follow the benchmark index NIFTY Midcap 50 TRI. Investors who wish to invest in passive funds that offer market-linked returns can explore this fund option.
Investment objective of the fund
Axis Nifty Midcap 50 Index Fund’s investment objective is long-term wealth creation by investing in a basket of Nifty Midcap 50 Index stocks and aiming for returns that are commensurate with this benchmark, subject to tracking error. The fund will indirectly invest in Mid-sized companies that are in the establishment phase and offer higher growth prospects. These stocks may be slightly volatile and offer higher liquidity.
Why should you apply for the NFO?
Exposure to mid-cap growth prospects: This index fund will offer investors the benefit of higher liquidity and faster growth opportunities that come with mid-cap investments. Since the fund will track and invest in the composition of the Nifty Midcap 50 index, it offers the potential of fetching higher returns in the long run. Investors can expect returns commensurate with this index.
Benefits of passive management: Since the index fund will invest in the constituent stocks of the Nifty Midcap 50 index, the fund’s expense ratio is expected to be considerably low. This also eliminates fund manager bias as far as stock selection is concerned.
Risk-reward balance: With mid-cap stock investments, this index fund can offer higher long-term rewards in line with the index returns. Investors who are looking for higher rewards in return for higher risk can explore this investment opportunity.
Easy investment: It is easy to invest in this index fund NFO through the Fisdom app. Since this is a passive fund, investors don’t have to regularly track the fund’s portfolio, as it will mirror the composition of the benchmark index.
Comparative performance of Nifty Midcap 50 index: In the table below, investors can look at the comparative historical performance of the Nifty Midcap 50 index against the Nifty index to get an idea about the potential returns that the index fund may offer in the long run:
| Nifty Midcap 50 | Nifty | Nifty 500 | |
| 1-Year | 14.28% | 8.75% | 10.80% |
| 2-Year | 68.04% | 47.83% | 53.35% |
| 3-Year | 58.04% | 46.91% | 50.60% |
Source: Bloomberg Quint
Fund details
| Scheme name | NFO details for Axis Nifty Midcap 50 Index fund |
| Type of Scheme | An open-ended index fund investing in constituent stocks of the Nifty Midcap 50 index. |
| Category of the scheme | Index fund |
| Benchmark | Nifty Midcap 50 index |
| Plan options | Not available |
| Fund Manager | Jinesh Gopani |
| Exit Load | 0.25% for 7 days |
| Minimum Investment | Rs. 5,000 and in multiples of Re. 1/- thereafter |
| Expense Ratio | Not known |
| NFO Period | 10 Mar 2022 – 21 Mar 2022 |
Where can you invest in the NFO?
Head over to the Fisdom App to invest in this NFO.
FAQs
NFO (New Fund Offer) is launched by the Asset Management Companies (AMCs) to generate funds for launching a new mutual fund. These funds are then pooled to buy the shares or other securities as per the fund’s mandate or the guidelines based on which the fund is launched. NFOs are like IPOs where all the relevant details of the funds are provided at the time of their launch and the units of the fund are usually set at Rs. 10 per unit for a subscription. SEBI guidelines allow the NFOs to be active for a maximum period of 30 days following which the units of the fund are traded based on their daily NAV.
NFOs, at the time of their launch, are launched in two categories namely close-ended funds and open-ended funds. The details of each type of fund are mentioned below.
Open-ended funds
The majority of mutual funds are launched as open-ended funds. Investors can subscribe to the fund at the nominal rate (usually Rs. 10 per unit) during the NFO period. After the NFO period, when the units are traded based on the daily NAV, the investors stand to gain huge capital gains depending on the performance of the fund.
Close-ended funds
Close-ended funds, on the other hand, do not allow the investors to subscribe to the fund after the NFO period is closed.
Investing in NFOs is a very good opportunity to maximize the returns as the units can be subscribed at nominal rates and the returns are potentially higher based on the prevailing NAV at the time of redemption. However, there are several points that need to be considered while subscribing to an NFO. Some of such points are highlighted below.
a)Track record of the AMC
NFOs are offered for the new mutual fund so no proven track record can be reviewed by investors to make an informed investment decision. The investors have to therefore rely on the reputation of the AMC and other details mentioned in the NFO to make an investment decision.
b)Expense ratio (if mentioned)
NFOs need a good amount of publicity to make the investors aware of the fund and the investment opportunity. It is therefore essential for the investors to check the expense ratio of the fund and ensure that it does not outweigh the net gains.
c)Check if the fund is in correlation to the existing portfolio
Recently there have been many NFOs in the market that investors can choose from. However, while selecting the fund the investors must check if the fund is not similar to an existing fund in their portfolio. For example, if the fund is a large-cap fund and the investor already has one or two similar funds in their portfolio, investing in another will not add much value to the net returns or the diversification of the portfolio. On the other hand, many NFOs can be sector-specific or country-specific. In such a case, investors have to check if the fund is in line with other factors like their risk-return profile and investment goals.
d)Review the SID carefully
Reviewing the SID (Scheme Information Document) is a crucial step that should not be missed by investors while investing in NFOs. It contains all the relevant information about the fund managers, their qualifications, and experience which is crucial for the funds’ performance. Other relevant information includes the investment profile of the fund, target sectors or securities, benchmark index, asset allocation ratio, etc. This helps the investors understand the returns expectation of the fund as well as the target investments where the fund will invest the pooled funds. Investors having a risk-return profile in line with that of the fund can thus invest in such funds.
Investment in NFOs can be done through two main routes i.e., the online or offline modes. The details of the same are mentioned below.
a)Online mode
The online mode of investment is suitable for investors already having a Demat account and a trading account. Investors can simply select the NFO and invest by selecting the number of units to invest and paying for the same through online payment modes available on the platform.
b)Offline mode
The offline mode of investment in NFOs is through registered brokers and distributors. Investors can contact their brokers and distributors providing them with the details of the amount to be invested and they can invest in the selected NFOs on their behalf. Investors can make hassle-free investments through such modes as all the necessary forms to be filled and the formalities to be met are looked after by these entities giving investors the benefit of ease of investment. The charges for such services are nominal when compared to the potentially high returns.
