The response from the investors is, more or less, encouraging considering the subdued equity markets. Magnum Index Fund, which was opened for public subscription on December 18, will reopen for continuous sale from February 1.
The response to the open-end equity scheme has been mainly from high networth individuals and institutions. Although big ticket investors have responded to the IPO, the retail investor response does not seem very encouraging.
This was largely expected as the small investors are still staying away from equity, the fund source said.
Magnum Index Fund from the SBI Mutual Fund is the ninth index fund and has performed better than six other index funds in the primary market. According to data provided by Value Research, Franklin India Index had mopped up Rs 20.97 crore, Franklin India Index Tax Fund Rs 1.21 crore and Nifty Benchmark Exchange Traded Fund Rs 21 crore. Pioneer ITIs two index fund plans (which track Sensex as well as Nifty) together mobilised close to Rs 5 crore.
IDBI PRINCIPAL Index Fund mobilised a massive Rs 161 crore and UTI Master Index Rs 135 crore. The IPO of UTI Nifty Index Fund had also evoked encouraging investor response with a total mobilisation of Rs 56.98 crore.
Index funds are passively managed and they are yet to become popular. They track the benchmark index and invests only in those companies which form the index. The investment in companies which constitute the index is in the same weightage as they represent in the benchmark. Index funds have managed to replicate the performance of the benchmark index and are not designed to outperform the index.
Magnum Index Fund will track S&P CNX Nifty Index where the investments will be made in all the 50 stocks which constitute the index. The minimum investments under the scheme is Rs 5,000 and in multiples of Rs 1,000 thereafter. While the scheme is charging an entry load of 1 per cent, there is no exit load. The scheme has an estimated annual expenses of 1.55 per cent.
The scheme offers systematic investment option and the minimum investment is fixed at Rs 1,000 for six months or Rs 100 for twelve months.
A systematic withdrawal facility is also available for periodic withdrawals and the minimum amount for withdrawal is Rs 500. Besides, the scheme also provides the facility to switchover at NAV related prices to other open-end schemes of SBI Mutual Fund.