NFO Alert: Bajaj Finserv AMC’s Entry into ETF Market with Launch of Nifty 50 and Nifty Bank ETF

Bajaj Finserv Mutual Fund, a subsidiary of Bajaj Finserv Limited, has announced the launch of two new exchange-traded funds (ETFs) as part of its new fund offers (NFOs). The schemes, namely Bajaj Finserv Nifty 50 ETF and Bajaj Finserv Nifty Bank ETF, opened for subscription on January 15, 2024, and will close on January 18, 2024. These are the first ETF products from the company and mark its entry into the ETF market.

What are ETFs?

ETFs are passive funds that track an underlying index and trade on the stock exchanges like shares. They offer investors the benefits of diversification, low cost, liquidity, transparency and tax efficiency. ETFs are suitable for investors who want to invest in a basket of securities that reflect the performance of a particular index or sector.

What are the features of Bajaj Finserv Nifty 50 ETF and Bajaj Finserv Nifty Bank ETF?

Bajaj Finserv Nifty 50 ETF will invest in the securities comprising the Nifty 50 Index in the same proportion as in the index. The Nifty 50 Index is a diversified index of 50 large-cap companies across 13 sectors, representing about 66% of the total market capitalization of the Indian equity market. The scheme aims to provide returns that closely correspond to the total returns of the Nifty 50 Index, subject to tracking error.

Bajaj Finserv Nifty Bank ETF will invest in the securities comprising the Nifty Bank Index in the same proportion as in the index. The Nifty Bank Index is a sectoral index of 12 banking stocks, representing about 90% of the total market capitalization of the Indian banking sector. The scheme aims to provide returns that closely correspond to the total returns of the Nifty Bank Index, subject to tracking error.

The minimum application amount for both the schemes is Rs.5,000 and in multiples of Re.1 thereafter. The units of both the schemes will be listed on BSE and NSE and can be bought and sold at market prices during trading hours. The expense ratio for both the schemes is capped at 0.07% per annum.

What are the benefits and risks of investing in Bajaj Finserv Nifty 50 ETF and Bajaj Finserv Nifty Bank ETF?

Investing in Bajaj Finserv Nifty 50 ETF and Bajaj Finserv Nifty Bank ETF can offer investors the following benefits:

• Exposure to well-established and leading companies in their respective sectors
• Diversification across sectors and companies
• Low cost as compared to actively managed funds
• Liquidity as units can be traded on stock exchanges
• Transparency as portfolio composition is disclosed daily
• Tax efficiency as no capital gains tax is levied on switching between ETFs

However, investing in Bajaj Finserv Nifty 50 ETF and Bajaj Finserv Nifty Bank ETF also involves certain risks such as:

• Market risk as the value of units may fluctuate due to changes in market conditions
• Tracking error risk as the performance of the schemes may deviate from that of their respective indices due to various factors such as expenses, cash holdings, corporate actions, etc.
• Liquidity risk as there may not be enough buyers or sellers for the units at a given time or price
• Regulatory risk as changes in laws or regulations may affect the schemes or their underlying securities

Investors should read the scheme information document and key information memorandum carefully before investing and consult their financial advisors if required.