NFOs in focus: Baroda BNP Paribas Dividend Yield Fund, Bandhan BSE Healthcare Index Fund, AB Sun Life Nifty India Defence Index Fund. Check details

It is raining NFOs in the market. New fund offerings in the mutual fund industry, provide individuals with the opportunity to purchase units of a mutual fund before its Net Asset Value (NAV) is calculated. This early investment allows individuals the potential to generate profits over the long term as the fund grows and NAV increases.

Baroda BNP Paribas Dividend Yield Fund

Baroda BNP Paribas Mutual Fund has floated a new investment scheme named the Baroda BNP Paribas Dividend Yield Fund. This open-ended equity scheme is designed to prioritize dividend-yielding stocks, with the goal of generating wealth through a combination of capital appreciation and dividend income. 

As per the company, the fund will primarily invest in companies known for offering dividends and showcasing steady growth. It will specifically target businesses with reliable and consistent cash flows, overseen by management teams that emphasize the importance of providing regular returns to shareholders.

The investment approach of the scheme involves a "rigorous" five-stage selection process to construct a market cap agnostic portfolio of reasonably priced companies, while actively avoiding potential dividend traps.

Features and investment approach

> The fund is designed with a key emphasis on companies exhibiting substantial free cash flow, a metric that typically aligns with favourable share price movements. Furthermore, the fund places importance on promoter alignment with minority shareholders, as exemplified by its track record of steady dividend distributions.

> The new fund offer is scheduled to open from August 22 to September 5, 2024.

> The scheme aims to invest in companies with predictable and stable cash flows, led by managements that prioritise rewarding shareholders with regular dividends. The approach is to invest in growth companies that are also rewarding investors through regular dividends and buybacks.

> The minimum investment amount is Rs 1,000 and in multiples of Re 1 thereafter. The minimum investment amount for daily, weekly, monthly SIP is Rs 500 and in multiples of Re 1 thereafter.

> Shiv Chanani will manage this new fund.

> The exit load applicable will be nil, if units of the scheme are redeemed or switched out up to 10 per cent of the units within one year from the date of allotment. 

> An exit load of 1 per cent will be applicable if units of the scheme are redeemed or switched out in excess of the limit within one year from the date of allotment. If units of scheme are redeemed or switched out after one year from the date of allotment, the exit load applicable will be nil.

Bandhan BSE Healthcare Index Fund

Bandhan Mutual Fund has floated its Bandhan BSE Healthcare Index Fund, which is a new open-ended scheme that would allow investors to tap into India’s rapidly expanding healthcare sector.

The fund will follow the performance of the BSE Healthcare Index, a comprehensive index that includes various companies operating in the healthcare sector. These companies span across pharmaceuticals, hospitals, diagnostic services, biotechnology firms, and manufacturers of medical equipment.

Features and investment approach

> The New Fund Offer (NFO) opens on Wednesday, August 21, 2024, and will close on September 3, 2024.
> The minimum investment amount is Rs 1,000 for lump-sum investments and Rs 100 for Systematic Investment Plans (SIPs).
> The fund will allocate 95-100% of its assets to securities included in the BSE Healthcare Index, including stocks and index derivatives. The remaining 0-5% may be invested in debt and money market instruments.
> The BSE Healthcare Index covers a broad range of companies within the healthcare sector, including pharmaceuticals, hospitals, diagnostics, medical equipment and supplies, and biotechnology.
> The BSE Healthcare Index has demonstrated superior performance compared to the Nifty 50 Index over the past 3 and 5 years. Specifically, the average rolling returns for the BSE Healthcare TRI index stood at 15.97% for the 5-year period and 14.89% for the 3-year period. In comparison, the Nifty 50 Index reported average rolling returns of 12.84% for 5 years and 12.52% for 3 years.
Vishal Kapoor, CEO of Bandhan AMC, said: “India’s healthcare industry is globally recognised for vaccine manufacturing, generic drug production, and medical tourism. With the rising prevalence of lifestyle diseases, an aging population, and increased access to quality healthcare, the sector is poised for significant growth.” 

Aditya Birla Sun Life Nifty India Defence Index Fund

Aditya Birla Sun Life Asset Management Company (AMC) has recently introduced an open-ended index fund designed to mirror the movements of the Nifty India Defence Index. The Aditya Birla Sun Life Nifty India Defence Index Fund's objective is to leverage the advancements and opportunities within the expanding defence sector.

This launch corresponds with a key juncture in India's defence industry, characterized by notable changes propelled by the government's emphasis on self-sufficiency and modernization, as stated by the organization in an official communication.

With India's defence expenditure standing at Rs 6.22 lakh crore and an anticipated compound annual growth rate of 15% in capital expenses from FY24-30, the industry emerges as an attractive investment avenue. The fund enables investors to gain access to a diverse array of companies contributing to the country's defence prowess, encompassing entities involved in manufacturing, aerospace, shipbuilding, and defence electronics.

Features and investment approach

> The new fund offer (NFO) opened for subscription on August 9 and will close on August 23, 2024.
 
> Investment objective: The scheme intends to provide returns that, before expenses, correspond to the total returns of securities as represented by the Nifty India Defence Total Return Index, subject to tracking errors. The scheme does not guarantee/indicate any returns. There is no assurance or guarantee that the investment objective of the scheme will be achieved, said the AMC.
> The scheme invests a minimum of 95 per cent in equity constituting the Nifty India Defence Index. The index’s constituents are selected from the universe of the 750 Nifty Total Market Index. 
> A minimum of 10 stocks present in the Society of Indian Defence Manufacturers are selected and which obtain at least 10 per cent of revenues from the defence index. The weighting of stocks will be based on free float market capitalisation. There is a stock capping of 30 stocks and no single stock shall have a weight of more than 20 per cent.
 
> The Fund will be managed by Haresh Mehta
 
> Investment Lump sum: Minimum of Rs 500 and in multiples of Rs 100 thereafter.
 
> Monthly / weekly SIP: Minimum of Rs 500 and in multiples of Re 1 thereafter.

"The government has significantly increased its investment in the defence sector to meet internal needs, reduce import dependence and produce for the rising global demand. The sector features high barriers to entry due to its capital-intensive nature and the continuous evolution of product types," said A Balasubramanian, managing director & chief executive officer of Aditya Birla Sun Life AMC.