Akash Jha
DSP Mutual Fund has introduced the DSP Nifty IT ETF, an open-ended exchange-traded fund (ETF) that replicates or tracks the Nifty IT index. The DSP Nifty IT ETF’s new fund offer began on Wednesday and will be available for subscription until July 3, 2023. The ETF provides investors with the potential to profit from the long-term performance of Indian IT companies.
Anil Ghelani, CFA, Head – Passive Investments & Products, DSP Mutual Fund, stated, “The Indian IT sector has been a consistent long-term performer due to their global competitiveness and edge, which augur well for the near future. After underperforming in the recent past, the Nifty IT index is in an intriguing position for investors seeking to capitalize on this long-term growth narrative. At current levels, we believe valuations are approaching average multiples, and many companies in this sector appear financially healthier and relatively less expensive than their global IT peers.”
On Wednesday, Nifty IT ended at 29,025.70 up by 94.90 points or 0.33%. Tech Mahindra was the top gainer, up by 1.15%. Coforge, Wipro, TCS, LTTS, and HCL Tech also gained between 0.4% to 1%. Persistent Systems, Infosys, Mphasis, and LTIM were top laggards.
Here are the key highlights of DSP Nifty IT ETF:
- On June 21st, 2023, investors can subscribe to the DSP Nifty IT ETF’s New Fund Offer until July 3rd, 2023.
- DSP MF claims that the Indian IT industry has continuously outperformed other industries and grown its share of India’s GDP. Indian IT firms have consistently outpaced their international competitors, resulting in a larger share of the industry as a whole. Investors are more likely to reward Indian IT companies with higher earning multiples since they experience less earnings unpredictability.
- The MF said that investors can reduce their exposure to domestic risks by diversifying their equity portfolios into the IT sector due to the industry’s global exposure to revenue flows.
- The Indian IT industry has a lower price to earnings ratio and a lower price to book ratio than its global peers, according to the mutual fund house, and it also has a higher Return on Equity (ROE) and higher Return on Assets (ROAs).
- For the last year and a half, the Nifty IT index has lagged behind the benchmark Nifty 50. However, DSP research shows that periods of underperformance usually end in a rebound as market cycles progress. According to the numbers, the Nifty IT index fell by 24.5% in 2022, while the Nifty 50 rose by 5.7%. While the Nifty 50 index rose by 25.6% in 2021, the Nifty IT index increased by 62.3%.
- As a result, the percentage of Nifty 50 stocks devoted to the information technology industry is now lower than it has been in the past.
- However, DSP also highlighted that the Nifty IT index has beaten the Nifty 50 during one-year, three-year, five-year, and ten-year rolling return periods.
- The Nifty IT index is highly weighted and skewed toward major companies. Weight in the index was distributed as follows: 26% to TCS, 24% to Infosys, 10% each to HCL Technology and Wipro. L&T Technology Services, Persistent Systems, Coforge, and Mphasis all have 2%, while Tech Mahindra and LTI Mindtree both have 9%.
- Investors should be aware that the index poses sector and stock level concentration risks and that the fund may be more volatile and subject to larger drawdowns than diversified equity funds,” the mutual fund warned. In the short term, this fund may also lag behind similarly diversified equities funds.
- DSP Mutual Fund has outperformed its peers in the investment industry for over 25 years. Over 35 lakh investors from various walks of life have their money managed by the mutual fund. These investors range from wage earners to high net worth people to non-resident aliens to business owners large and small to trusts and overseas institutions.
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