SBI Mutual Fund has launched SBI ETF Sensex Next 50, which is the first Exchange Traded Fund (ETF) to be mounted on the Sensex Next 50. SBI Mutual Fund already has an ETF mounted on the Nifty Next 50.
Indeed, a host of ETFs has been mounted on the Nifty Next 50. UTI Next 50 ETF opened its NFO on in June 2018 and ICICI Prudential Nifty Next 50 had its NFO in August 2018. HDFC Mutual Fund has filed papers for its own Nifty Next 50 ETF in May 2018 and Reliance Mutual Fund followed suit in July 2018.
However, SBI appears to be the first fund house to opt for the Sensex Next 50 Index rather than the Nifty Next 50 Index. Both indices represent the 50 companies that rank immediately below the top 50 companies by market capitalisation (hence the ‘Next 50’). The SBI Sensex Nifty 50 will seek to replicate the performance of the Sensex Next 50 Index. It will hold stocks forming part of the index in the weights in which they are present in the index.
Sensex Next 50 or Nifty Next 50?
As of 31st August, the Nifty Next 50 had one-year returns of 11.4% and five-year returns of 24.4% CAGR. The Index is led by companies like Britannia Industries, JSW Steel, Godrej Consumer Products and Piramal Enterprises. Sector-wise, the index is dominated by consumer goods (27.69%), financial services (21.09%) and automobiles (11.09%).
As of 31st August, the Sensex Next 50 had one-year returns of 6.5% and five-year returns of 22%. The index is led by companies like Bajaj Finserv, JSW Steel, Britannia Enterprises and Piramal Enterprises.
The two indices are very similar and there is no convincing case to choose one over the other for the long term.
About the NFO
The NFO will run from 5th to 10th September 2018. Thereafter the ETF will list on the market and investors can buy and sell its units on stock exchanges. However, investors will need demat and trading accounts to do so.
SBI ETF Sensex Next 50 will be mandated to invest 95% of its assets in the Sensex Next 50 Index and the rest in money market instruments. The minimum investment amount is Rs 5,000. The S&P BSE Sensex Next 50 Index will be the benchmark of the scheme. Raviprakash Sharma, who manages other SBI ETFs, will manage the SBI ETF Sensex Next 50. The role of a fund manager is limited when it comes to ETFs.