All about HDFC Reality Index Fund NFO

Here's a quick timeline of HDFC MF

2000: HDFC MF was registered with SEBI.

2003: Acquired Zurich Mutual Fund schemes.

2001: A joint venture was formed between HDFC Limited & abrdn Investment Management Limited (erstwhile known as Standard Life Investments Limited)

2014: Acquired Morgan Stanley Mutual Fund

2018: Launched IPO and became a listed company.

2023: Total Assets Under Management (AUM) as on March 31, 2023 become ₹ 4.4 Trillion.

Today, HDFC Mutual fund offers funds in various categories such as Diversified Equity, Hybrid, Index, Thematic/Sectoral equity, Equity Linked Savings Scheme (ELSS), Solution Oriented, Theme Based Debt, Duration Based Debt, ETF, and Fund of Funds.

This month HDF Mutual Fund is coming with first realty index based fund NFO (New Fund Offer). This fund will be replicating/tracking NIFTY Realty Index (TRI).

This fund will be managed by Mr. Nirman S. Morakhia along with Mr. Arun Agarwal. Both of these fund managers have extensive experience in managing multiple index funds. Each of them already handle more than 10 index funds in various categories.

NFO Timeline

NFO of the fund will remain open from 7th March, 2024 and will remain open till 21st of March, 2024. As this is thematic equity oriented fund this fund comes under very high risk category.

@startmermaid timeline title HDFC Reality Index NFO Timeline 7th March, 2024: NFO Open 21st of March, 2024: NFO close April, 2024: Fund open for further investment @endmermaid

To know more about fund check the NFO presentation .

Perform of NIFTY Realty Index (TRI)

As per data from NSE Indices Ltd, on a 10 year basis NIFTY Realty Index (TRI) grown at the CAGR rate of 20.1% against Nifty 50 TRI's growth of 16.6%. This outperformance is also observed on 5, 3, 2, and 1 year basis. However since inception of the Nifty Reality Inde in December 2006, it has given paltry 0.03% returns where as for the same period Nifty 50 TRI has given 12.4% returns.

Also Nifty Realy TRI remained significatly more volatile compared to Nifty 50 TRI.

Why invest in the HDFC NIFTY Realty Index Fund?

• The Realty sector is recovering after a decade-long period of consolidation
• Rising per capita incomes, improving affordability, increased urbanization, government initiatives and RERA (Real EstateRegulation & Development Act, 2016 ) can drive growth for years to come.
• Passive exposure to Real Estate sector through the HDFC NIFTY Realty Index Fund.
• Listed Companies have strengthened their balance sheets and improved their profitability metrics over the last 6-7 years.
• A single Index Fund gives the investor sector exposure to multiple Realty stocks – no need for individual stock selection.
• Less impact of company-specific risk.
• Capture performance of the sector with lower volatility than its underlying constituents.

Current compostion of NIFTY Realty Index

As per NSE Indices Ltd. Data as of Feb 29, 2024 Nifty Realty Index compries of below 10 companies.

• DLF Ltd.
• Macrotech Developers Ltd.
• Godrej Properties Ltd.
• Phoenix Mills Ltd.
• Prestige Estates Projects Ltd.
• Oberoi Realty Ltd.
• Brigade Enterprises Ltd.
• Sobha Ltd.
• Swan Energy Ltd.
• Mahindra Lifespace Developers Ltd.

@startmermaid pie title Constituent Weightages (%) "DLF Ltd." : 29.2 "Macrotech Developers Ltd." : 14.1 "Godrej Properties Ltd." : 13.8 "Phoenix Mills Ltd." : 12.9 "Prestige Estates Projects Ltd." : 8.2 "Oberoi Realty Ltd." : 7.9 "Brigade Enterprises Ltd." : 6.3 "Sobha Ltd." : 2.8 "Swan Energy Ltd." : 2.7 "Mahindra Lifespace Developers Ltd." : 2.2 @endmermaid

How do Index Funds Work?

Index Funds mirror an underlying index (eg. Nifty 50, Sensex) and endeavor to perform in line with their underlying index Index Funds are like ordinary mutual funds - investors can invest or redeem their money at the End of Day NAV. In order to mirror the underlying index as closely as possible, Equity Index Funds aim to own the same securities in the same proportion (weights) as the underlying index Index funds are gaining in popularity on account of their simplicity, lower cost, and minimal tracking error.
Learn more about Index Fund.

Should Investor Invest in this Index Fund?

As the fund is very specific to reality sector and has high volatility compared to Nifty 50 Index, its prudent to take limited exposure to this fund. Investors should consider this fund as part of their overall reality sector allocation and accordingly consider investing portion in to this fund. Its possible to participate in this NFO via SIP route as well. Considering overall volatility SIP could help you average out your investment over a period of time. SIP for 3 to 5 years could be considered in this fund.