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ICICI Prudential Mutual Fund Launches India’s First Auto Index Fund, NFO Opens On Sep 22

ICICI Prudential Mutual Fund on Wednesday launched f India’s first open-ended auto index scheme, ICICI Prudential Nifty Auto Index Fund, focusing on the bluechip auto and auto ancillary sector. 


The new fund offer (NFO) opens on September 22, 2022, and closes on October 06, 2022


The scheme, replicating the Nifty Auto Index, will track the listed automobile stocks, wagering on the auto universe’s possible growth amid a strong macroeconomic recovery and rising individual income.

 

Data provided by the fund house showed that the Nifty Auto Index grew at 14.21 per cent annually since August 2012.


Speaking at the launch event, Chintan Haria, the head of product development & strategy ICICI Prudential Mutual Fund, said that India is expected to be the world’s third-largest automotive market by 2030, offering investors an immense opportunity to tap into India’s evolving auto space. 


He exuded confidence that with the government support for electric mobility and India emerging as a global hub for auto component sourcing, the “space is likely to be under the spotlight.”


Although the auto industry is cyclical, the “sector boasts of a much higher return on capital employed (RoCE) and cash generation compared with other sectors,” he added.


Nifty Auto Index And Corpus Allocation

The ICICI Prudential Nifty Auto Index Fund will track the automobile segment of the financial market, covering the Nifty 500. The fund allocation will be not more than 33 per cent in a single stock; likewise, the total weight of the top three stocks won’t be over 62 per cent at the rebalancing time. The fund house said the index would rebalance semi-annually in March and September, respectively.

Factors For Upbeat Auto Segment


The fund house believes the rising individual income could boost the auto industry. It estimates that India’s electric vehicle (EV) market could grow at a compound annual growth rate (CAGR) of 49 per cent between 2022 and 2030. It is expected to hit 10 million vehicle sales annually by 2030.


Furthermore, the government plans to develop India as a global manufacturing and research hub for the auto segment. It plans to set up R&D centers at the cost of more than US$388 million under its National Automotive Testing and R&D Infrastructure Project (NATRiP). 

Besides, the fund house noted that low-cost skilled labour, R&D centres, rising auto exports, and cheap steel production provide excellent opportunities for investment.

 



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