HDFC Mutual Fund launches India's first domestic fund on realty sector

HDFC Mutual Fund, India’s third-biggest asset management company (AMC) in terms of assets, has launched an open-ended scheme tracking the Nifty Realty Total Return Index (TRI). This is the first mutual fund scheme that would focus on the domestic realty sector.

PGIM India Mutual Fund has an international scheme named PGIM India Global Select Real Estate Securities.

The new fund offer (NFO) for HDFC Nifty Realty Index Fund opened on March 7 and will close on March 21.

According to the fund house, which had assets under management (AUM) of Rs 6.29 trillion as of February end, the realty sector has the potential for long-term growth with large-scale development across residential, commercial, retail, hospitality and SEZ projects.

“Improving affordability, increased urbanization and improved transparency through government initiatives could drive growth for years to come. Furthermore, listed realty companies’ fundamentals have improved with a continued formalisation of the sector along with higher profitability and reduced leverage over the last six-seven years,” HDFC Mutual Fund said.

HDFC Nifty Realty Index Fund offers investors exposure to a diversified portfolio of real estate stocks through a single instrument, eliminating the need for individual stock selection.

Commenting on the launch, Navneet Munot, Managing Director and Chief Executive Officer, HDFC Asset Management Company, said, “At HDFC Mutual Fund, our mission to be the wealth creator for every Indian continues to drive us to offer a wide range of investment solutions to meet the needs of investors.”

HDFC Nifty Realty Index Fund is a passive fund, which will invest in stocks that are part of the Nifty Realty index.

The fund managers of the scheme would be Nirman Morakhia and Arun Agarwal and the minimum investment during the NFO Period and continuous offer period (after the scheme reopens for repurchase and sale), would be Rs 100.

In terms of index construction, Nifty Realty Index currently has 10 constituents.

DLF has the highest weightage among all the constituents at 29.2 percent. It is followed by Macrotech Developers (14.1 percent), Godrej Properties(13.8 percent), Phoenix Mills (12.9 percent) and Prestige Estates Projects (8.2 percent).

From an asset allocation perspective, financial advisors suggest retail investors to be cautious of sectoral or thematic funds as these are highly risky, and if an investor is new to equity investing, then it is better to start with a diversified equity fund.