A Primer on Groww Nifty Non-Cyclical Consumer Index Fund

Summary

In this podcast, Mr. Karthik from Grow Mutual Fund introduces the Nifty Non-Cyclical Consumer Index and the associated NFO. The index comprises 30 stocks from essential consumer industries like FMCG, Telecom, and textiles, with a focus on stability during market downturns. Karthik explains the index's historical outperformance compared to Nifty50 and its defensive nature, suggesting it's suitable for long-term investors. He also discusses the fund's strategy, valuation, and the importance of consulting a financial advisor before investing.

Takeaways

• 📈 The Nifty Non-Cyclical Consumer Index is a lesser-known index that includes companies involved in everyday life, such as consumer durables, services, telecom, and textiles.
• 🏪 The index comprises 30 stocks, with each stock having a maximum weight of 10%, and is rebalanced based on the last six months of free float market capitalization as of January and July.
• 🛒 The industries represented in the index include FMCG, consumer services, durables, telecom, and textiles, covering essential goods and services that are part of daily life.
• 📊 The index has historically outperformed the Nifty 50 during market downturns, showing less decline and providing a defensive investment option.
• 💡 The Grow Nifty Non-Cyclical Consumer Index Fund is an NFO (New Fund Offer) open for subscription from May 2nd to May 16th, aiming to replicate the performance of the index.
• 💰 The fund's strategy is to generate long-term capital appreciation by investing in the same stocks as the index, with the same weights, to achieve similar returns before expenses.
• 📊 Historical returns of the index have been compared to the Nifty 50, showing a higher return over various time periods, such as 31% in one year compared to Nifty 50's 21%.
• 🔍 Investors are advised to consider valuation factors, such as the Price-to-Earnings (P/E) ratio, which indicates the fund's current valuation is fairly valued compared to its historical numbers.
• 🌐 The growth of the Indian middle class and urbanization, along with the trend of companies moving from unorganized to organized sectors, are factors that may influence the index's future performance.
• ⚠️ The fund is classified as highly risky, and investors are encouraged to consult a financial advisor before making investment decisions.
• 📚 Detailed scheme documents should be read, and understanding the rebalancing strategy and tracking error minimization is crucial for potential investors.

Q & A

What is the Nifty Non-Cyclical Consumer Index?

The Nifty Non-Cyclical Consumer Index consists of companies that are part of our day-to-day lives, including industries such as FMCG, consumer services, consumer durables, telecom, and textiles. It is made up of 30 stocks and is based on the last 6 months' free float market capitalization, with an individual stock's weight capped at 10%.

What does FMCG stand for and what does it include?

FMCG stands for Fast-Moving Consumer Goods, which includes everyday items such as food and household products.

How is the composition of the Nifty Non-Cyclical Consumer Index determined?

The composition of the index is determined based on the last 6 months' free float market capitalization, which is fixed on the end date of January and July each year.

Why might an investor consider the Nifty Non-Cyclical Consumer Index over Nifty 50 during market volatility?

The Nifty Non-Cyclical Consumer Index has historically fallen less compared to the Nifty 50 during market downturns, showing resilience and outperformance in 9 out of the last 11 observations.

What are the top constituents of the Nifty Non-Cyclical Consumer Index?

The specific top constituents are not mentioned in the script, but they are companies from essential industries that are part of our daily lives, such as FMCG, consumer services, consumer durables, telecom, and textiles.

How does the Nifty Non-Cyclical Consumer Index perform compared to Nifty 50 in terms of returns over different time periods?

Over one year, the index has given about 31% return compared to Nifty 50's 21%. Over 15 years, Nifty 50 has given about 15.5% return, while the non-cyclical consumer index has generated about 17.5% return, showing outperformance over the long term.

What is the current valuation of the Nifty Non-Cyclical Consumer Index in terms of P/E ratio?

The current P/E ratio is about 59.5, which is considered fairly valued or relatively undervalued compared to its own historical numbers, with a 10-year average P/E of about 10.1 and a 5-year average of about 14.41.

Why is the Grow Nifty Non-Cyclical Consumer Index Fund considered a good investment option according to the discussion?

The fund is considered a good investment option due to its valuation, the growing income of the Indian middle class, and the trend of companies moving from unorganized to organized sectors, which could lead to increased consumption.

What is the investment strategy of the Grow Nifty Non-Cyclical Consumer Index Fund?

The fund aims to generate long-term capital appreciation by investing in the stocks that are part of the underlying index, with the objective of generating returns similar to the index before expenses, while minimizing tracking error through portfolio rebalancing.

What is the risk classification of the Grow Nifty Non-Cyclical Consumer Index Fund?

The Grow Nifty Non-Cyclical Consumer Index Fund has been classified as highly risky.

When is the Grow Nifty Non-Cyclical Consumer Index Fund open for subscription?

The fund is open for subscription from the 2nd of May until the 16th of May.

Outlines

00:00

📈 Introduction to the Nifty Non-Cyclical Consumer Index

In this segment, the host introduces the topic of the podcast as the Nifty Non-Cyclical Consumer Index, a lesser-known index that is the focus of a new investment opportunity. The Grow Mutual Fund has launched a New Fund Offer (NFO) based on this index, called the Grow Nifty Non-Cyclical Consumer Index Fund, which is open for subscription from May 2nd to May 16th. Mr. Karthik from Grow Mutual Fund joins the discussion to provide insights into the index and the fund. The Nifty Non-Cyclical Consumer Index comprises companies that are integral to everyday life, including sectors such as consumer durables, services, telecom, and textiles. It consists of 30 stocks with a maximum weightage of 10% for individual stocks, based on the last six months' free float market capitalization as of January and July. The index is characterized by its stability and defensive nature, making it an attractive option for investors seeking long-term growth.

05:02

💡 Understanding the Industries and Valuations of the Nifty Non-Cyclical Consumer Index

This paragraph delves deeper into the industries represented in the Nifty Non-Cyclical Consumer Index, which includes FMCG, consumer services, consumer durables, telecom, and textiles. The FMCG sector is highlighted as the largest in nature, encompassing food and household items. The index's performance is compared with the Nifty 50, showing outperformance during market downturns in 9 out of 11 observations. The discussion also covers the index's valuation, using the price-to-earnings (P/E) ratio as a measure. The current P/E ratio is compared with historical averages, suggesting that the index is fairly valued or even undervalued relative to its past performance. The segment concludes with reasons why an investor might consider investing in the Grow Nifty Non-Cyclical Consumer Index Fund, including its defensive nature, the growing income of the Indian middle class, and the trend of companies moving from unorganized to organized sectors. It is emphasized that the fund is classified as high risk, and investors should consult with a financial advisor before making investment decisions.

Keywords

💡Nifty Non-Cyclical Consumer Index

The Nifty Non-Cyclical Consumer Index is a financial index that represents a collection of companies whose products and services are integral to everyday life. These companies are less affected by economic cycles, making them more stable investments. In the video, it is mentioned as the basis for the Grow Mutual Fund's NFO (New Fund Offer), highlighting its significance in the investment discussion.

💡Grow Mutual Fund

Grow Mutual Fund is the financial institution that has introduced a new investment offering (NFO) based on the Nifty Non-Cyclical Consumer Index. The video discusses this fund as a potential investment opportunity, emphasizing its focus on companies that provide essential goods and services.

💡NFO (New Fund Offer)

NFO stands for New Fund Offer, which is a term used in the financial industry to describe the initial public offering of a mutual fund. In the context of the video, the Grow Nifty Non-Cyclical Consumer Index Fund is open for subscription, indicating that it is a new investment option for interested investors.

💡Consumer Durables

Consumer Durables refers to goods that are bought once and used over a long period, such as furniture, electronics, and appliances. In the video, these durables are part of the industries represented in the Nifty Non-Cyclical Consumer Index, signifying their importance in the daily lives of consumers.

💡FMCG (Fast-Moving Consumer Goods)

FMCG stands for Fast-Moving Consumer Goods, which are products that are sold quickly and at a relatively low cost. Examples include food, beverages, and household items. The video mentions FMCG as a significant component of the Nifty Non-Cyclical Consumer Index, underlining its role in the daily consumption patterns of consumers.

💡Telecom

Telecom, short for telecommunications, refers to the industry that provides communication services and infrastructure. In the video, Telecom is listed as one of the industries included in the Nifty Non-Cyclical Consumer Index, indicating the essential nature of communication services in modern life.

💡Market Volatility

Market Volatility refers to the rapid fluctuations in the value of investments and the financial markets. The video discusses how the Nifty Non-Cyclical Consumer Index has performed relatively well during times of market volatility, suggesting that the index may offer stability compared to broader market indices like Nifty50.

💡Draw Down

Draw Down in financial terms refers to the peak-to-trough decline during a specific record period of an investment, fund, or commodity. The video mentions that the Nifty Non-Cyclical Consumer Index has fallen less during draw down periods compared to Nifty50, indicating its potential as a defensive investment.

💡Defensive Stocks

Defensive Stocks are shares in companies that provide essential goods or services and are less affected by economic downturns. The video describes the companies in the Nifty Non-Cyclical Consumer Index as defensive in nature, suggesting that they may offer protection to investors' portfolios during economic downturns.

💡P/E Ratio

P/E Ratio stands for Price-to-Earnings Ratio, which is a valuation ratio calculated by dividing the market value of a company by its earnings. In the video, the P/E Ratio is used to assess the valuation of the Nifty Non-Cyclical Consumer Index, with the current ratio indicating that it may be undervalued compared to its historical averages.

💡Tracking Error

Tracking Error measures how closely a fund's performance follows the performance of its benchmark index. The video mentions the strategy of the Grow Nifty Non-Cyclical Consumer Index Fund to minimize tracking error by rebalancing its portfolio in line with changes in the index, aiming to replicate the index's performance.

Highlights

Introduction of the Nifty non-cyclical consumer index and its mutual fund by Grow.

Explanation of what the Nifty non-cyclical consumer index represents, including its composition of 30 stocks from essential industries.

Description of the industries included in the index, such as FMCG, consumer services, consumer durables, telecom, and textiles.

The index's individual stock weightage capped at 10% to diversify risk.

Reasons to consider investing in the index, including access to top stocks and its performance during market downturns.

Comparison of the index's performance with Nifty50, showing outperformance in 9 out of 11 observations.

The defensive nature of the stocks in the index, providing resilience regardless of economic conditions.

Advice for investors to consult a financial advisor before making investment decisions.

Comparison of the index's returns with Nifty50 over different time periods, showing higher returns for the non-cyclical consumer index.

Discussion on valuation factors, particularly the Price-to-Earnings (P/E) ratio, and its significance for investors.

Current valuation assessment of the index, indicating it as fairly valued or relatively undervalued compared to its historical numbers.

Factors suggesting the current moment as a potential time for investment, including valuation, middle-class income growth, and organizational shifts in companies.

Features of the Grow Nifty non-cyclical consumer Index Fund, focusing on long-term capital appreciation.

Fund strategy to minimize tracking error by rebalancing the portfolio according to index weight changes and fund flows.

Emphasis on the high-risk classification of the fund and the importance of consulting a financial advisor.

Subscription period announcement for the Grow Nifty non-cyclical consumer Index Fund, from 2nd to 16th of May.

Transcripts

hi everyone welcome to another podcast

and today we're going to be talking

about this relatively lesser known index

the Nifty non-cyclical consumer index so

grow mutual fund has come up with an nfo

which is based on this particular index

it's called The Grow Nifty non-cyclical

consumer index which is open for

subscription from the 2nd of May until

the 16th of May to talk more about this

we have Mr Karthik uh who's from grow

mutual fund and he'll be explaining us

more about the index and the funds so

let's dive into it uh welcome karik so

thank you very much Shankar I'm really

excited to be part of your show I'm

really looking forward for this

interaction so Karthik let's start out

with the most basic of all questions so

could you please tell us what the Nifty

noncyclical consumer index is certainly

when you look at noncyclical consumer

index these are the companies which are

part of our day-to-day lives when you

look at uh the products and services

which we use on day-to-day basis are

part of this particular

index um when you look at this index uh

it forms uh you know it consists of

Industries like consumer durables

consumer services Telecom textiles Etc

if you to Deep dive into this particular

index uh this index is made up of 30

stocks uh which follows this particular

theme and uh the composition is based on

last 6 months free float market

capitalization which is fixed based on

the end date of January July and one

interesting thing to be kept in mind

here is um individual stocks weightage

is CED at 10% okay got it KK uh can you

do a little more Deep dive into these

industries I mean what are these

industries uh and also can you tell us

what are the top constituents which are

a part of this index so when you look at

this particular Index this is made up of

seven Industries um to begin with it

starts from fmcg consumer services

Consumer durables Telecom textiles Etc

if you were to Deep dive into these

industries uh fmcg being the world's

largest uh in nature it forms it would

have

food um then you know like let's say

household items Etc when you look at uh

Telecom it involves communication as

well as the it companies consumer

durables would mean essentially we are

talking about the lasting Goods uh which

involves Furniture the so-called white

goods uh right Electronics Etc uh when

we talk about Services it would have a

broad spectrum of uh Services which

includes

Transportation um you know like let's

say media and and Etc so basically it's

a collection of companies which which

are part of our day-to-day lives that's

great Karthik so why should someone

consider investing in this index well

there are certain interesting reasons

one could look at uh this particular

index gives you access to top 30 uh

stocks in the uh in this space or in

this theme right the second reason is

when you compare this particular index

with uh

nifty50 uh especially during Market

volatile times or what we call it as a

draw down this index has fallen lesser

compared to the nifty50 itself so when

you look at last 11 observations uh nine

times there has been an outperformance

the index has fallen lesser compared to

the nifty 50 that's the second reason

and third interesting reason is uh all

the industries and the what we looked at

right all these are the essential part

of our life so irrespective of economic

condition uh there there would be that

resilience in these companies right so

that also would mean that these uh

stocks are defensive in nature so these

are certain reasons I think one could

consider but however I personally feel

um as an investor should consult their

financial adviser before they take their

investment decision uh that's great

Karthik could you give us a clearer

picture on how the Nifty noncyclical

consumer index Compares with the nifty50

returns is something what everybody is

interested to know right I think uh when

you when we talk about returns it makes

sense for us to compare uh returns for

different time periods what we call it

as pointto Point returns right um You

Look at 1 year 3 year 5 year multiple

time periods when you compare this

particular particular index performance

against nifty 50 let's look at the broad

spectrum one year returns nifty 50 index

has given close to 21% return whereas

our index has given about

31% when you look at the other spectrum

that is 15 years right uh nifty50 has

given about 15 and a half% return about

and uh the non-cyclical consumer index

has generated a returns of about 17 and

a half so there is a very clear

outperformance um of the index uh when

compared to nifty50 and regarding the

current valuations uh how should an

investor look at it yeah so valuation is

one factor an investor would be

interested to know but there has to be

certain parameter to measure that

valuation I think one of the most common

valuation uh Factor what we look at is p

ratio the the price to earning ratio

what we call it as right I mean um

whatever is the market price Visa V we

compared to the earnings per share so

every one rupee of uh earning to get

that one rupe of earning how much are

you investing so essentially as an

investor I would always want to invest

lesser for every one rupe of earning and

then when you look at p ratio uh it

makes sense for you to compare it with

uh in this case when we are comparing

the B ratio of this index with it its

own historical numbers it gives us a

perspective right so last 10 years uh

average p is about

101 in The Last 5 Years the average p is

about 14 41 the current levels is about

59 and a half so this is where we stand

the valuation uh looks uh fairly valued

or relatively compared to its own past

fairly undervalued right so given

everything we've discussed why would you

say now is the moment to look into

investing into the grow Nifty

noncyclical consumer Index Fund so to

answer this question let's look at three

simple factors the first one being the

valuation factors what we have already

discussed that being one the second one

uh the income of Indian middle class and

the cities are growing so this would

result in an uptic Trend in the

consumption right that's the second

factor and the third one being uh

companies are moving from being

unorganized to organized all these

points uh would help an investor to

consider if they're interested in

long-term investing however this fund

has been classified as highly risky so

it makes sense for someone to consult

their financial adviser to to decide on

this so what are the features of the

grow Nifty non cycal consumer Index Fund

so the scheme aims to generate long-term

capital appreciation by investing into

the stocks which are part of the under

underlying index the Investments would

be in the same stocks and the same weage

Etc so the uh the objective is to

generate returns in the similar lines to

that of uh index before the expenses so

however uh there can be no assurances or

guarantees uh which can be given that

the scheme sche objectives would be met

so investors who are looking to be part

of these Securities can consider

investing into the scheme so the scheme

strategy revolves around reducing the uh

tracking error to the least possible

extent by rebalancing of the portfolio

considering the changes in the weights

of the stocks in the index as well as

the incremental Collections and the

redemptions into the scheme so investors

should read the scheme documents in

detail and consult their financial

adviser before for investing thank you

Karthik for breaking down the grow Nifty

noncyclical consumer Index Fund it's

been a valuable discussion we've had

today and to our listeners remember to

do your research and consult a financial

advisor before taking any investment

decision the grow Nifty non-cyclical

consumer Index Fund is open for

subscription from the 2nd of May until

the 16th of May