SBI Mutual Fund has filed papers for a Quality ETF which will track securities covered by the Nifty 200 Quality 30 Index. The Nifty 200 Quality 30 index includes top 30 companies from its parent NIFTY 200 index, selected based on their ‘quality’ scores.
The quality score for each company is determined based on return on equity (ROE), financial leverage (Debt/Equity Ratio) and earning (EPS) growth variability analysed during the previous five years. SBI’s ETF will thus combine passive ETF investing with ‘active’ stock selection based on security characteristics. In other words, it will bring the much-hyped concept of ‘smart beta’ to the Indian market.
So what is included in the Nifty 200 Quality 30? The index is dominated by consumer goods and IT. The former has a 33% weight and the latter has a 23.76% weight. In terms of companies, TCS, Infosys, HCL Tech, HUL and Coal India lead the index. The index limits the weight of any single company to 5%. It applies three major filters for stock selection – EPS Growth, Return on Equity (RoE) and Debt-to-Equity over the past five years.
The Index has a one year return of 25.82% and a five-year return of 18.77%.
The SBI Nifty 200 Quality 30 ETF will invest 95-100% of its assets in the securities represented in the index, as per the weights they occupy there. It will invest 0-5% of its assets in money market instruments. The Nifty 200 Quality 30 ETF will be the benchmark of the ETF.
Raviprakash Sharma who manages other SBI ETFs will manage the assets of this scheme.