The first passive fund in the Indian mutual fund industry based on Nifty Midcap 150 Quality 50 Index – the DSP Nifty Midcap 150 Quality 50 ETF – has been launched by DSP Investment Managers. This new quality-focused mid cap ETF offers investors an option to invest in quality mid-cap companies with the potential of higher profitability, lower leverage & relatively stable earnings.
The fund house has also announced the launch of another new MF scheme, DSP Nifty 50 ETF, which will invest in all the 50 companies from the Nifty 50 Index in line with the index. The New Fund Offer for both ETFs opens for subscription on December 6th 2021 and closes on December 17th 2021, after which it will be purchased and sold on the stock exchanges.
Nifty Midcap 150 Quality 50 ETF
DSP Nifty Midcap 150 Quality 50 ETF follows a zero-bias, rule-based strategy by replicating the Nifty Midcap 150 Quality 50 Index, without fund manager ‘thinking’ or emotions involved. This index selects 50 companies from the parent Nifty Midcap 150 index based on ‘Quality Scores’ using metrics like return on equity, financial leverage (except for financial services companies) & earning per share (EPS) growth variability of each stock analysed during the previous 5 financial years.
Mid-caps hold the potential to become large-cap stocks over the long term. However, not all mid-caps may see their fortunes turn into large-caps. “Our analysis shows that while approximately 12-14 per cent mid- caps successfully grow over cycles and become large, there is risk of stagnation and de-growth for most others. Most of them remain small or mid- caps. The characteristics of those that generate superior returns are the ones that have high ROE, run their business with low debt & have relatively stable profit growth. The DSP Nifty Midcap 150 Quality 50 ETF is designed with these principles. Out of the mid cap index, it only chooses companies which qualify on these metrics. Our investors can build their portfolio of mid – caps with such a disciplined design that reduces the risk of weak businesses from the overall index.” says Kalpen Parekh, MD & CEO, DSP Investment Managers.
Nifty 50 ETF
DSP Nifty 50 ETF replicates the Nifty 50 Index, which follows a market-cap weighted strategy. In other words, each company in the portfolio is assigned weights based on free-float market capitalization.
The DSP Nifty 50 ETF is suitable for those new to the stock markets or beginner-level MF investors. Experienced investors who are looking for lower-cost approaches to investing in the equity market can also consider investing in the ETF.