Publish Date:
At the lifetime high of the Indian equity, Tata Mutual Fund has launched India’s first Tata Nifty India Tourism Index Fund, an open-ended mutual scheme replicating/tracking the Nifty India Tourism Total Return Index (TRI). The New Fund Offer period is from July 8 to July 19, 2024.
It is potentially a gateway to explore wealth creation opportunities in India's tourism sector, which is growing particularly after the COVID-19 pandemic.
India's growing middle-income group, which currently represents 31% of the population, and is expected to reach 47% by 2031 is driving domestic appetite for travel and tourism, as per PRICE. There is an increased demand for flights, airline companies are expanding their fleet, the food industry is setting up quick service restaurants (QSRs) at airports and tourism destinations, and hotel chains recognising this, are also expanding to various regions.
The government too is developing the infrastructure – launching new airports, routes, and developing tourist destinations to promote tourism.
Tata Nifty India Tourism Index Fund will invest 95%-100% of its assets in equity and equity-related securities of companies covered by the Nifty India Tourism Index.
Up to 5% may be invested in debt & money market instruments (like but not limited to commercial paper, certificates of deposit, treasury bills, bills rediscounting, short-term corporate bonds, repos, short-term government securities and any other such short-term instruments as may be allowed under the regulations prevailing from time to time) and units of liquid/money market/debt mutual fund schemes of Tata Mutual Fund or in the Scheme(s) of other mutual funds in conformity with the investment objective/ asset allocation of the Scheme. The allocation of up to 5% in these securities is mainly to meet the liquidity and expense requirements.
What Is the Investment Objective?
The investment objective of Tata Nifty India Tourism Index Fund is to provide returns, before expenses, that commensurate with the performance of Nifty India Tourism TRI, subject to tracking error. However, there is no assurance or guarantee that the investment objective of the scheme will be achieved. The scheme does not assure or guarantee any returns.
What Is the Investment Strategy?
Being an index fund, the Scheme will follow a passive investment strategy. The corpus of the Scheme will be invested in stocks constituting the underlying index in the same proportion as in the Index and endeavour to track the benchmark index.
The Scheme may take exposure to equity derivatives instruments of constituents of the underlying index for a short duration when securities of the index are unavailable, insufficient or for rebalancing at the time of change in the index or case of corporate actions, etc.
Only a small portion (up to 5% of the net assets) may be invested in money market instruments to meet the liquidity and expense requirements.
While aiming to replicate/track the Nifty India Tourism Index, the Scheme will aim to minimise the tracking error by:
- Rebalancing of the portfolio
- Setting off incremental subscriptions against redemptions
- Use of derivatives for portfolio rebalancing and efficient portfolio management
- Fast track in expediting in deployment of cash
- Maintaining low levels of cash
The AMC would monitor the tracking error of the Scheme on an ongoing basis to keep it low (with a 2% limit).
The Tata Nifty India Tourism Index Fund will benchmark its Nifty India Tourism Total Return Index.
About the Nifty India Tourism Index
The Nifty India Tourism Index, which was launched recently on June 18, 2024, aims to track the performance of stocks from the Nifty 500 Index that represents the travel and tourism theme. The largest 30 stocks from eligible basic industries are selected based on a 6-month average free-float market. The stock weights in this index are capped at 20%.
Table: Top Constituents of the Nifty India Tourism Index by Weightage
(Source: NSE Indexogram Factsheet as of June 2028)
Since its inception, the Nifty India Tourism Index has delivered a price return of 11.7% and a total return (which includes dividends) of 12.4%.
Graph: Long-term Performance of Nifty India Tourism Index
Base date: April 1, 2005; data as of June 28, 2024
(Source: NSE Indexogram Factsheet as of June 2028)
Over the last one year, the Nifty India Tourism Index has clocked an impressive absolute return of 45.7% (TRI), proving to be a rewarding sector for investors.
Here’s what, Mr Anand Vardarajan, Chief Business Officer at Tata AMC, said at the fund launch,
“High disposable income, infrastructure developments like better highway connectivity, improved railway comfort & speed and so many new airports have made travel easy, swift and safe. We are witnessing exponential growth in domestic aviation, hotels, restaurants, and travel which augurs very well for the tourism segment. All types of travel, be it pilgrimage, business, medical, or leisure are registering a surge. This makes a compelling case for looking at tourism as a segment and how one could invest and aim to benefit from the growth of this sector.”
Who Will Manage Tata Nifty India Tourism Index Fund?
Mr. Kapil Menon, a commerce graduate (B.com) who holds over 20 years of experience is the fund manager for Tata Nifty India Tourism Index Fund. He manages several other index funds and Exchange-Traded Funds (ETFs) at Tata Mutual Fund.
How much is the Minimum Investment in Tata Nifty India Tourism Index Fund?
The minimum investment in case of lump sum is Rs 5,000 and for SIP (Systematic Investment Plan), Rs 100. The scheme offers both, the Direct Plan and Regular Plan for investments.
Who Should Consider Investing?
Given the nature of the Scheme and its investment strategy, investors have concentrated exposure to the Nifty India Tourism Index. Thus, only investors with a high-risk appetite, wanting focused exposure to the tourism theme without much diversification, and having a longer investment horizon may consider such an investment proposition.
Even if you have a high-risk appetite, it is suggested to have a very small exposure to the overall equity portfolio to this fund.
To know more about Tata Nifty India Tourism Index Fund, read the Scheme Information Document and Key Information Memorandum.
Happy Investing!