DSP Nifty IT ETF: Chance to benefit from good showing of Indian IT companies; NFO details here

DSP Mutual Fund has launched DSP Nifty IT ETF, an open-ended exchange-traded fund (ETF) replicating/tracking the Nifty IT index. In a statement, DSP Mutual Fund said the ETF will offer investors an opportunity to benefit from the good showing of Indian IT companies over the long term. 

“The Indian IT sector has been growing consistently compared to other sectors over the years and has increased its contribution to India’s GDP.  Indian IT companies have also grown significantly above global peers over the years, which has also resulted in their growing market share.  Indian IT companies also see less variability when it comes to earnings, reducing earnings surprises and consequently being rewarded with higher earning multiples by investors,” it said.  

“IT sector also offers global exposure to revenue flows, which helps in diversifying equity portfolios away from domestic risks. The Indian IT sector also exhibits better financial strength through higher Return on Equity (ROE) and higher Return on Assets (ROAs) than its global peers, while being relatively attractive on valuation parameters like lower price-to-earnings ratios and price-to-book ratios,” the statement added. 

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Nifty IT Index performance 

According to the statement, the Nifty IT index has been underperforming the Nifty 50 for the last 1.5 years and this has historically resulted in a turnaround in performance in the past market cycles. The weightage of the IT sector in Nifty 50 has also declined below its long-term average.  

The Nifty IT index has outperformed the Nifty 50 on a rolling return basis across 1-year, 3-year, 5 years and 10-year timeframes. 

“However, investors should bear in mind that the index presents sector and stock level concentration risks and that the fund can have higher volatility and drawdowns as compared to diversified equity funds. This fund can also underperform diversified equity funds in the short term,” DSP Mutual Fund said. 

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New Fund Offer 

The New Fund Offer for the DSP Nifty IT ETF opened for subscription on June 21^st 2023, and closes on July 3^rd 2023. 

“The Indian IT sector has been a consistent performer in the long term thanks to the global competitiveness and edge that they possess which also bodes well for the foreseeable future. Investors looking to benefit from this long-term growth story may consider investing in the Nifty IT index which is interestingly poised after underperforming in the recent past. We believe that at current levels, valuations are approaching average multiples, and many companies in this sector appear financially healthier and relatively cheaper when compared to global IT peers”, said Anil Ghelani, CFA, Head – Passive Investments & Products, DSP Mutual Fund. 

Disclaimer: The above information is based on a press release issued by DSP Mutual Fund. Mutual Fund investments are subject to market risks. Please consult your financial advisor before investing.