NFO Alert: Tata Mutual Fund launches Nifty Midcap 150 Index Fund

Tata Mutual Fund has announced the launch of Tata Nifty Midcap 150 Index Fund, a new passive offering that gives investors an opportunity to gain exposure to mid-sized Indian companies that may potentially grow faster than the country’s GDP.

The new fund offer or NFO of the scheme is open for subscription and will close on June 16. The scheme will re-open for continuous sale and repurchase on June 25.

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The investment objective of the scheme is to provide returns, before expenses, that are commensurate with the performance of the Nifty Midcap 150 Index (TRI), subject to tracking error.

The scheme will be benchmarked against the Nifty Midcap 150 Index (TRI) and will be managed by Kapil Menon and Rakesh Prajapati.

The minimum application amount is Rs 5,000 and in multiples of Re 1 thereafter. The scheme will allocate 95-100% in securities covered by Nifty Midcap 150 Index (TRI) and 0-5% in debt/money market instruments, including units of mutual funds.

This passive fund is suitable for investors who are seeking long-term capital appreciation and want returns that correspond to the total returns of the securities as represented by the Nifty Midcap 150 Index (TRI), subject to tracking error.

Despite the correction in midcap stocks in the recent market volatility, their outperformance to large-cap peers in longer periods reflects investors’ confidence in the segment. The Nifty Midcap 150 TRI has delivered a 1-year rolling return of 21.89%, compared to 16.37% by the Nifty 50 TRI. Over a 3-year rolling period, midcaps have returned 15.8%, again outperforming large caps, which returned 12.38% during the same period, according to a press release by the fund house.

“Midcaps represent India’s growth frontier. Through the Tata Nifty Midcap 150 Index Fund, investors can get access to potential growth sectors and companies that are integral to India’s next phase of economic expansion,” said Anand Vardarajan, Chief Business Officer, Tata Asset Management.

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“The fund is suitable for long-term investors seeking a blend of growth and diversification, backed by the discipline of passive investing,” he added.

The Nifty Midcap 150 index comprises companies across 20 sectors and 74 basic industries, offering exposure to potentially growth sectors such as chemicals, oil, gas & consumable fuels, capital goods, automobiles & auto components, realty, financial services, information technology, etc.

Notably, 39 industries present in the midcap space but absent in the large cap space account for over 40% of the total weight of the index, highlighting the unique diversification benefit that the segment offers, the fund house mentioned.

Over the past five years, 17 companies from the midcap segment have transitioned into large caps, illustrating the segment’s capacity to aim for wealth creation.

By tracking the Nifty Midcap 150 index through passive investment, investors avoid stock-specific risks and benefit from a disciplined and cost-effective investment strategy. Historically, midcaps have outperformed large caps and small caps in systematic investment plans (SIPs), delivering an alpha of approximately 4% and 2% CAGR over the past 20 years, respectively, the fund house mentioned.