A new ETF – Exchange Traded Fund offer from Kotak Mutual Fund – Kotak NV20 ETF -which is open till Nov 26, 2015 for initial subscription.
It provides an opportunity to invest highly liquid , 20 value blue chip stocks which are part of Nifty.
After NFO period , it will be listed at exchange and thereafter trading is possible.
NV20 ETF offers to simulate the structure of NSE NV20 Index – which is designed to reflect the behaviour and performance of value companies from NIFTY index.
- Different value parameters : like PE ratio, PB ratio,Dividend yield are considered while selecting stock in NV20 index and its weightage in index.
Top 10 stocks of NV20 index as on quarter ended sept 30 , 2015 are as follows:
| Company’s Name | Weightage % | |
| Infosys | 15.99 | |
| ICICI Bank | 13.01 | |
| Reliance Industries Fund | 11.79 | |
| Tata Consultancy Services | 10.98 | |
| Axis Bank | 6.91 | |
| State Bank Of India | 6.08 | |
| Mahindra & Mahindra Ltd | 4.84 | |
| Hindustan Unilever Limited | 4.79 | |
| HCL Technologies Limited | 4.51 | |
| Coal India Limited | 3.49 |
So this ETF will simulate these stocks along with remaining 10 stocks which are not mentioned here.
Benefits of NV20 ETF:
- Stocks will be highly liquid, value blue chip stocks.
- Cost will be low as compared to mutual fund scheme.
- Can be sold easily online during market hours so good liquidity.
- Better Risk Management : as investing in bunch of stocks.
What are disadvantages of NV 20 ETF:
- Investor will need demat account as it is traded fund.
- This is passive type of investment as fund manager have no scope for any active participation.
- Any good managed Mutual fund scheme can generate good Alpha over a longer period of time through active scheme management.
- Its conservative to find Value stocks from Nifty index.A number of value stocks can come from mid cap space.
- If you want to invest systematically then you need to do it manually..
- Tracking Error:
NSE NV20 index is rebalanced semi-annually at end of January and July each year.so there will be change of scripts and their weightage within index .Also considering scheme expenses (though they will be small )there will some error in returns (+Ve or -Ve) .Returns of ETF will not exactly resemble that of NSE NV20 index.
Exchane Traded Funds are not as much popular in India in comparison with direct equity and mutual funds.But this ETF can be a good Low cost option with better risk management.
