SBI Mutual Fund has announced a new fund offering (NFO) of SBI – ETF Quality, an open-ended Exchange Traded Fund that will track the performance of the Nifty 200 Quality 30 Index. The NFO period of the scheme is from November 26 to December 3, 2018. Subsequent to the NFO close date, the ETF will trade on stock exchanges, just like stocks of listed companies. The scheme will be listed on the NSE and any other proposed exchanges after December 3. Unlike mutual funds, intraday trades are allowed on ETFs. You need a demat account and trading account to invest in ETFs.
The scheme will invest 95 to 100 percent of its assets in the Nifty 200 Quality 30 Index. Investment in money market instruments and units of liquid mutual funds will be capped at 5 percent. Money market instruments include securities like commercial papers, treasury bills. The scheme will not invest in unrated debt instruments and shall not engage in short selling.
The SBI-ETF Quality scheme will be benchmarked against the Nifty 200 Quality 30 Total Return Index (TRI). The benchmark index, which was launched in April 2018, includes the top 30 companies of its parent index, Nifty 200.
Top 30 companies are selected on the basis of the ‘quality score’ of a company, which is calculated on the basis of return on equity, debt/equity ratio and earnings per share of a company in the last five years. Stable earnings, higher profitability ratios and lower financial leverage companies are the key characteristics of the companies included in the benchmark index. A higher leverage company would be one that uses more debt to finance its operations. If a company has higher debt financing, the amount of interest it pays would be higher, which would have a negative impact on the bottom-line EPS of the company.
The Nifty 200 Quality Index includes companies from various sectors. Sectors with the highest weightage are – consumer goods (33.33 percent), IT (23,76 percent) and the automobile sector (18.53 percent). Some of the top components (by weightage) in the index are Tata Consultancy Services (6.22 percent), Infosys (5.37 percent), HCL (5.20 percent), among others.
|Index Name||1-yr TRI (%)||5-yr TRI (%)|
|Nifty 200 Quality 30 TRI||25.82||16.66|
*Returns data as of April 30, 2018
The fund will be managed by Raviprakash Sharma. Sharma also manages other passive schemes like SBI Nifty Index Fund, SBI Gold Fund, SBI ETF Nifty 50, SBI ETF Sensex, among others. Since the SBI – ETF Quality scheme is also a passive one, the role of a fund manager will be limited.
Key information about SBI – ETF Quality NFO:
|NFO period||November 26 – December 3, 2018|
|Minimum application amount||Rs. 5,000|
|Benchmark||Nifty 200 Quality 30 TRI|
|Fund manager||Raviprakash Sharma|