Groww MF to roll out Indias first Nifty non-cyclical consumer index fund

Groww Mutual Fund has received the green light from SEBI to launch the Groww Nifty Non-Cyclical Consumer Index Fund.

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 prioritising 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 six-month average free-float market capitalisation as of January and July. Stock weights are assigned based on their free-float market capitalization, capped at 10 per cent 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 prioritises 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 capitalisation 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 per cent.

 

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 analyse 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:

	15 years	10 years	5 years
Fund	Returns	Std	Sharpe	Returns	Std	Sharpe	Returns	Std	Sharpe
NIFTY NON-CYCLICAL CONSUMER	17.66%	5.03%	1.57	16.38%	4.24%	1.96	17.22%	4.50%	2.09
NIFTY 50	15.40%	5.70%	0.99	14.57%	4.84%	1.35	16.15%	5.61%	1.49
Nifty TMI	15.23%	5.93%	0.92	14.99%	5.00%	1.39	16.46%	5.75%	1.51

 

Valuations:

Valuations look favourable, with the current P/E being below five- and 10-year averages.

	10-year average P/E Ratio	5-year average P/E Ratio	Current P/E Ratio
Nifty Non-Cyclical Consumer Index	101.01	140.99	59.35

 

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.

• Macroeconomic drivers: Rising per capita GDP, urbanization, and digitisation 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 capitalise 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.)