The Axis Nifty Energy Index Fund opened for subscription on August 7 and will close on August 21. The Axis Nifty Energy ETF will open on August 12 and remain open until August 21.
The ETF will subsequently be listed on the stock exchanges.
What do the funds invest in?
Both schemes will seek to replicate the Nifty Energy TRI, subject to tracking error and expenses. The index comprises up to 40 stocks from the Nifty 500 universe that are classified under the energy theme.
The portfolio can include companies across segments such as oil and gas, power generation, transmission and distribution, renewable energy, energy equipment and related infrastructure.
The index uses free-float market capitalisation to determine stock weights, with limits to reduce concentration. A single stock can account for a maximum of 10% of the index, while the weight of any industry is capped at 25% at the time of rebalancing.
The index is reconstituted and rebalanced twice a year, in March and September.
Index fund vs ETF
The Axis Nifty Energy Index Fund is an open-ended index fund and can be bought from the mutual fund during the NFO and subsequently through the regular mutual fund route. Its minimum application amount is ₹100 and in multiples of ₹1 thereafter.
The fund will charge an exit load of 0.25% if units are redeemed or switched out within 15 days from allotment. There is no exit load after that period.
The Axis Nifty Energy ETF, meanwhile, will also track the same index but will be listed on the stock exchange after the NFO. Investors will therefore need a demat account to buy or sell its units on the exchange.
The ETF has a minimum application amount of ₹5,000 and in multiples of ₹10 thereafter. It does not carry an exit load.
Both schemes will be managed by Nandik Malik and Rohit Gautam.
What is the investment strategy?
Since these are passive schemes, the funds will not take active calls on individual energy companies. Their objective is to replicate the performance of the Nifty Energy TRI, before expenses, rather than attempt to outperform the index through active stock selection.
The underlying index is designed to provide exposure to different parts of the energy ecosystem instead of focusing on a single segment such as oil and gas or renewable energy.
For investors, this means returns will largely depend on the performance of the companies included in the index, along with the impact of expenses and tracking error.
As a sector-focused strategy, the funds can also be more exposed to changes in commodity prices, government policy, energy demand, interest rates and the investment cycle than a broad-market index fund.