Shortly after getting the nod from market regulator Securities and Exchange Board of India (Sebi), IDBI Asset Management Company (AMC) has gone ahead to announce the launch of its first fund – IDBI Nifty Index Fund.
The fund will allocate it assets in all the stocks comprising S&P CNX Nifty Index in the same wieghtage in which they are represented in the index. The fund will provide diversification to investors across 50 stocks in 22 sectors and will represent about 60 per cent of the National Stock Exchange's (NSE) total market capitalization.
The fund intends to achieve its investment objective by minimising the tracking error between the total index returns and the fund. A tracking error is the difference in returns between a fund and its benchmark. The difference may be created due to various expenses such as marketing, advertising, office administration, brokerage and so on.
This is the 16th index fund to be launched in the entire MF industry which tracks the S&P Nifty Index. Before IDBI, IDFC had launched a similar fund -- IDFC Nifty Fund which is an open-ended index-linked equity fund.
Krishnamurthy Vijayan, MD and CEO of IDBI AMC, pointed out, "A Nifty Index Fund offers multiple advantages to existing as well as first-time investors. An investor can own the top 50 blue chip companies across 22 sectors which represent the India's growth story. The fund portfolio is pre-defined and independent of human judgement. The investor will pay lower charges than what he would have to pay for an actively managed fund."
This is IDBI Bank's second innings in the mutual fund business. IDBI was among the first few entities to launch a mutual fund business in 1994. IDBI first roped in a partner, the Principal Financial Group and eventually sold its interest and exited the AMC in 2000.
The minimum investment amount in this fund will be Rs. 5,000. The new fund offer (NFO) opened on May 3 and will close on May 31, 2010.
