NFO Alert: Aditya Birla Sun Life Mutual Fund launches Nifty India Defence Index Fund. Should you invest?

Aditya Birla Sun Life Mutual Fund has launched ABSL Nifty India Defence Index Fund for the public. The new fund offer (NFO) was launched on August 9 and will close on August 23. The scheme will again reopen within five days from the date of allotment.

The scheme aims to garner investment from those investors who are seeking to add exposure to a government policy-driven industry, and are also looking to add a sector, which has low correlation to the broader market, to their portfolio.

In order to woo investors to invest in this scheme, the mutual fund house points out that India is among the top four defence spenders after the US, China and Russia.

What kind of mutual fund scheme is this?

It is an open-ended index mutual fund replicating the Nifty India Defence Total Return Index.

What is the main objective of investing in this fund?

The scheme’s investment objective is to provide returns that correspond to the total returns of securities as represented by the Nifty India Defence Total Return Index, subject to tracking errors. However, there is no assurance that the investment objective of the scheme will be achieved.

How may one invest in this scheme?

One can invest a minimum of ₹500 in this scheme and in multiples of ₹100 thereafter. Since the scheme has both regular and direct plans, the investors are supposed to mention the plan for which the subscription is made by indicating the choice in the application form.

Each plan has the following options:

I. Growth

II. Income Distribution cum capital withdrawal (IDCW)

Are there similar mutual funds in the market?

Motilal Oswal Mutual Fund and HDFC Mutual fund also offer schemes in the category of defence sector.

How will the scheme benchmark its performance?

The scheme will be benchmarked to the performance of Nifty India Defence Total Return Index.

How does the scheme plan to allocate its assets?

The scheme plans to invest between 95 to 100 percent in equity & equity-related securities constituting the Nifty India Defence index, while the remaining 0 to 5 percent in debt and money market instruments (including cash and cash equivalent).

The key constituents of the index as on July 15, 2024 include Bharat Electronics (19.08%), Hindustan Aeronautics (18.28%), Solar Industries India (15.07%), Cochin Shipyard (10%), Mazagon Dock Shipbuilders (8.38%), Bharat Dynamics (7.66%) and Data Patterns (5.18%).

Are there any entry or exit loads to this scheme?

The scheme has an exit load (0.05% of applicable NAV) for redemption/ switch-out of units on or before 30 days from the date of allotment. After 30 days from the date of allotment, there is ‘nil’ redemption/ switch out of units.

Who will manage this scheme?

The scheme will be managed by Haresh Mehta and Pranav Gupta.

Does the fund contain any inherent risk?

As per the scheme’s risk-o-metre, the scheme has a very high risk. This means investors understand that their principal will be at very high risk. The investors who want to invest can visit this link for more details.