NFO Pick – (SBI Nifty200 Quality 30 Index Fund)

19 May 2025 , 10:31 AM

DECIPHERING SBI NIFTY200 QUALITY 30 INDEX FUND

The SBI Nifty200 Quality 30 Index Fund NFO is an open ended scheme, which will replicate the Nifty200 Quality 30 Index. Here are key highlights.

• The Nifty200 Quality 30 Index Fund will create a portfolio that replicates the 30 stocks that comprise this index. These stocks are selected into the index through an iterative bottom-up approach to stock selection and investing.
• This is a factor fund, and while the portfolio contours are defined by the index composition, it must be remembered that the index itself is an active index. Hence, there is risk of churn and also higher costs associated with such churn.
• The portfolio of the fund will replicate Nifty200 Quality 30 Index stocks to the extent of 95%-100%. Since, the idea is to replicate an index, there is no active selection of stocks in the fund. However, being a factor index fund, it runs the risk of tracking error.

Let us turn to some of the reasons to invest in the fund.

WHY INVEST IN THE SBI NIFTY200 QUALITY 30 INDEX FUND?

In terms of risk, these factor funds are ranked above pure index funds, but below active equity funds. Here is why to invest in SBI Nifty200 Quality 30 Index Fund.

• Since the underlying theme is quality, the investment is done in companies with strong balance sheets and earnings visibility.
• In terms of historical performance, the Index has delivered higher risk-adjusted returns compared to other factor themes in the long run.
• Investors can use this fund as a platform to gain exposure to a diversified portfolio of high quality Indian companies, even with a small upfront investment.
• Being a factor fund, there is no human bias in stock selection. This not only avoids human errors, but also creates an agnostic process for stock inclusion.
• Lastly, being an index (factor) fund, the total expense ratio (TER) is much lower than a typical active fund. This enhances ROI in the long run.

Let us turn to the composition of the Nifty200 Quality 30 Index.

WHAT THE NIFTY200 QUALITY 30 INDEX COMPRISES OF?

SBI Nifty200 Quality 30 Index comprises of 30 high quality stocks that are selected out of the Nifty200 Index. Here are some index highlights.

• The quality score to shortlist the 30 companies is arrived at based on factors like return on equity (ROE), financial leverage, and EPS growth variability.
• Weights to each stock in the index are based on a combination of quality and the square root of its market cap. For each stock, weight is capped at 5%.
• The Nifty200 Quality Index is a factor index that has 75.2% exposure to large caps and 24.8% exposure to mid-caps. P/E of the index is 28.74X, and dividend yield is 2.19%.
• In terms of sectoral exposure; FMCG is 30.34% of the index, IT is 23.31%, Capital Goods 12.50%, Oil & Gas 9.77%, Consumer Durables 6.96%, and Automobiles 6.39%.

In every market downturn in the last 18 years, the Nifty200 Quality Index has outperformed the Nifty 50 and the Nifty 200 TRI.

GLANCE AT THE SBI NIFTY200 QUALITY 30 INDEX FUND NFO

Here are key details of the SBI Nifty200 Quality 30 Index Fund NFO.

• The NFO opened on May 16, 2025 and closes on May 29, 2025. The allotment date will be within 15 days from close of NFO subscription. It is a factor index fund.
• On the risk-o-meter, SBI Nifty200 Quality 30 Index Fund is classified as “Very High Risk Fund,” due to its predominant exposure to equities and, the frequent churn. Also, quality theme may underperform in bullish markets.
• Investment objective is to replicate the Nifty 200 Quality 30 TRI index, and to minimize the tracking error in investing. There is no active stock selection by the fund.
• Exit load of 0.25% on redemption value is applicable, if redeemed within 15 days of allotment. There is no exit load after that. Investors are advised to hold for minimum 5-7 years to realize quality theme benefits.
• SBI Nifty200 Quality 30 Index Fund offers Regular and Direct plans. It also offers Growth option and IDCW option to investors. Viral Chhadva is the designated fund manager.
• Minimum application amount in NFO will be ₹5,000 and additional investments have to be of ₹1,000 minimum. The fund supports SIP, STP, and SWP plans.
• Being a quality factor fund, there is no return guarantee on the fund. The goal of the fund is to mirror the Nifty 200 Quality 30 TRI performance with minimal tracking error.
• SBI Nifty200 Quality 30 Index Fund, is classified as equity fund for tax purposes. STCG (under 1 year), will be taxed at 20.8% (including surcharge). LTCG (1 year or more), will be taxed at 12.5%, after maximum exemption of ₹1.25 Lakhs per financial year.

SBI Nifty200 Quality 30 Index Fund focuses on a select factor index which shortlists high quality companies from the Nifty 200. It offers investors a low-cost and simple method to get access to a high quality diversified portfolio of equities.