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.