NFO Pick – (Bandhan Nifty Next 50 Index Fund)

10 Feb 2025 , 09:25 AM

WHAT EXACTLY IS BANDHAN NIFTY NEXT 50 INDEX FUND?

The Bandhan Nifty Next 50 Index Fund is a passive fund that is designed to mirror the performance of the Nifty Next 50 Index Fund. This index is derived from the Nifty 100 index, after excluding the Nifty 50 companies. Being a passive fund, there will be no active stock selection risk. The endeavour will be to mirror the Nifty Next 50 Index TRI (total returns index) adjusted for costs, and to minimize the tracking error in the fund. In terms of performance, the Nifty Next 50 Index Fund has behaved in a manner that is more akin to the mid-cap and small cap indices. It has outperformed the Nifty in good times, although it has also underperformed in bearish markets. However, over a longer period of time the Nifty Next 50 Index has generated higher risk-adjusted returns, which is what matters.

BANDHAN NIFTY NEXT 50 INDEX FUND – WHY INVEST

Here are 5 reasons for you to invest in the Bandhan Nifty Next 50 Index Fund NFO and also in the continuous offer, with a necessarily long term approach.

• The Nifty Next 50 Index accounts for 18% of NSE market cap, and combines the growth potential of smaller companies with the stability and pedigree of Nifty companies.
• The Nifty Next 50 Index Fund offers a low cost exposure to some of the most disruptive Indian companies, with the potential to graduate into full-fledged Nifty companies.
• Most companies in the index are segment leaders. Classic examples are HAL, Varun Beverages, Interglobe Aviation, Divi’s Laboratories, Tata Power, Info Edge etc.
• Historically, the Nifty Next 50 index has shown a propensity to bounce back sharply when the correction has been over 20% from the peak.
• Being more diversified, the Nifty Next 50 index has historically offered higher risk-adjusted returns compared to the Nifty over longer time frames.

FOUR RULES FOR MAKING THE BEST OF NIFTY NEXT 50 INDEX

Here are 4 guiding factors to invest in the Bandhan Nifty Next 50 Index Fund.

• The Nifty Next 50 index has given best return when correction from top is more than 20% (as is the case now). Asset allocation timing will matter for this fund.
• Investors should look at this fund as a Nifty core portfolio diversifier, rather than as a standalone investing option. Also, a 5-7 years investment horizon works best.
• The key trigger for this index will be elevation to Nifty 50. In last 9 years, 24 stocks have been elevated from Nifty Next 50 to the Nifty 50.
• Lastly, despite higher risk-adjusted returns, the index is more volatile than Nifty. Hence, a SIP approach to investing will ensure benefits of rupee cost averaging.

GLANCE AT THE BANDHAN NIFTY NEXT 50 INDEX FUND NFO

Here are key details of the Bandhan Nifty Next 50 Index Fund NFO.

• The NFO opens on February 13, 2025 and closes on February 25, 2025. Regular sale and repurchase of units at NAV linked prices will start within 15 days after closure.
• On the risk-o-meter, Bandhan Nifty Next 50 Index Fund is classified as “Very High Risk” due to its predominant equity exposure, and indexed stocks with higher volatility.
• Investment objective of the fund is to mirror the Nifty Next 50 Index TRI performance, adjusted for costs, while ensuring that the tracking error is minimized.
• There is no entry load. If sold within 15 days of the allotment date, exit load of 0.25% of redemption value will be charged. There is no exit load if redeemed after 15 days.
• Bandhan Nifty Next 50 Index Fund offers Regular and Direct plans as well as Growth and IDCW options to investors. Nemish Sheth will be the designated fund manager.
• The minimum lumpsum investment in the NFO and for additional purchase will be ₹1,000. SIPs will be allowed in minimum of ₹100 a month, for minimum 6 instalments.
• Bandhan Nifty Next 50 Index Fund will be treated as an equity fund for tax purposes. STCG (less than 12 months) will be taxed at 20.4% (including cess). LTCG (over 12 months) will be taxed at 12.5%, with ₹1.25 lakhs base exemption per financial year.

The Bandhan Nifty Next 50 Index Fund offers a good model for long term wealth creation through a passive exposure to leader of tomorrow. However, considering the volatility in the segment and higher drawdowns, a SIP approach is strongly recommended.