This would be India’s first-ever non-cyclical index fund, and the NFO is scheduled to debut in early May. The fund will closely track the Nifty Non-Cyclical Consumer Index-TRI, aiming to provide steady long-term capital appreciation for investors.
By primarily focusing on consumption-related defensive stocks, the fund will operate as an open-ended scheme, catering to investors eyeing India’s upward per capita GDP trend while prioritizing stability.
Find out why this fund could be an ideal fit for your investment strategy and portfolio goals.
Nifty Non-Cyclical Consumer Index – What Does it Comprise?
Non-cyclical businesses are the ones that manufacture necessities with steady demand throughout the economic cycle. Therefore, the Nifty Non-Cyclical Consumer Index tracks stocks that represent the non-cyclical consumer sectors like Consumer Goods & Services, Telecom, Media & Entertainment, Textile, etc.
The index comprises the top 30 stocks from eligible basic industries, chosen by their 6-month average free-float market capitalization as of January and July. Stock weights are assigned based on their free-float market capitalization, capped at 10% per stock.
The aim of the Nifty Non-Cyclical Consumer Index Fund is to achieve long-term capital growth by investing in securities mirroring the Nifty Non-Cyclical Consumer Index (TRI) with matching weightage, aiming to imitate its total return, with possible tracking errors.
Sector Breakup
The index prioritizes sectors catering directly to consumers when breaking down its weightage.
Here’s how the sectors are weighted in the Nifty Non-Cyclical Consumer Index:
|
Sector Representation | Weight (%) |
|
Fast Moving Consumer Goods | 43.14 |
| Consumer Services | 21.48 |
| Consumer Durables | 20.08 |
| Telecommunication | 11.00 |
| Services | 2.57 |
| Textiles | 1.07 |
| Media, Entertainment & Publication | 0.65 |
Top Constituents:
The free-float market capitalization of each stock determines its weight in the index. Moreover, the Nifty Non Cyclical Consumer Index manages risk by capping the weightage of each stock up to 10%.
| Company Name | Weight (%) |
| Bharti Airtel Ltd. | 9.81 |
| Hindustan Unilever Ltd. | 9.90% |
| ITC Ltd. | 9.86% |
| Titan Company Ltd. | 8.05% |
| Asian Paints Ltd. | 6.52% |
| Nestle India Ltd. | 4.75% |
| Zomato Ltd. | 5.38% |
| Trent Ltd. | 4.42% |
| Tata Consumer Products Ltd. | 3.50% |
| Avenue Supermarts Ltd | 3.44% |
Now, let us analyze the performance of the Nifty Non Cyclical Consumer Index to determine if investing in it makes sense or not.
Performance:
Comparative Analysis (Returns)
The Nifty Non-Cyclical Consumer Index has consistently showcased superior performance compared to the Nifty 50 across various time horizons, affirming its strength as a compelling long-term investment choice.
| Index | CAGR_1y | CAGR_3y | CAGR_5y | CAGR_10y | CAGR_15y |
| NIFTY NON-CYCLICAL CONSUMER | 30.80% | 18.79% | 17.22% | 16.38% | 17.66% |
| NIFTY 50 | 20.74% | 17.12% | 16.15% | 14.57% | 15.40% |
| Nifty 500 | 26.57% | 20.19% | 17.45% | 16.04% | 16.41% |
| Nifty TMI | 26.47% | 19.55% | 16.46% | 14.99% | 15.23% |
Chart Insight:
The Nifty Non-Cyclical Consumer Index offers solid stability, absorbing economic ups and downs effectively. Additionally, in some cases, it can be a safer bet than the Nifty 50, delivering superior risk-adjusted returns, perfect for cautious investors.
Sharpe Ratio:
Valuations:
Valuations look favourable, with current P/E is below 5 and 10 year average
Future Growth Outlook
Trends in demography: The demand for non-cyclical products and services is anticipated to increase due to a youthful median population and growing disposable incomes, which will further support the index’s potential for future growth.
Risks and Opportunities: Investors should remain mindful of potential risks such as regulatory changes, competitive pressures and global economic uncertainties.
Macro economic drivers: Rising per capita GDP, urbanization, and digitization are anticipated to drive increased consumer spending, thus benefiting sectors within the index.
Who should invest?
- This fund is ideally suited for investors seeking stability and consistency in returns over time, making it an attractive option for those prioritizing financial security
- Investors with a lower risk tolerance will find this fund particularly appealing due to its emphasis on stability and predictability.
- Additionally, those looking to capitalize on India’s promising trajectory of rising per capita GDP growth will find this fund aligns well with their investment objectives.
Final word
So, suppose you are inclined towards incorporating a defensive investment strategy into your portfolio or contemplating an allocation for experimental purposes. In that case, it’s worth noting that Groww’s Nifty Non Cyclical Consumer Index Fund NFO will be out any day now. The index indeed presents a compelling investment opportunity in the Indian market, combining diversity, strong performance and promising growth prospects.
(This article is part of IndiaDotCom Pvt Ltd’s Consumer Connect Initiative, a paid publication programme. IDPL claims no editorial involvement and assumes no responsibility, liability or claims for any errors or omissions in the content of the article. The IDPL Editorial team is not responsible for this content.)
