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NEW DELHII: ICICI Prudential Mutual Fund has launched the industry’s first auto index fund, the ICICI Prudential Nifty Auto Index Fund. The new fund offer opens on 22 September and will close on 6 October.

The fund will track the Nifty Auto Index which has been designed to reflect the performance of the automobiles sector. The index comprises 15 listed companies and represents auto-related sectors such as auto ancillaries and tyres too. The index is composed using the free float market capitalization method.

As of 30 August, the top three stocks in the index were Mahindra & Mahindra, Maruti Suzuki India and Tata Motors with respective weights of 19.9%, 19.2% and 13.4%. Since inception, the index has returned, 16.4% (total return). As of 30 August, the 5-year total return for the index was 5.8%.

According to a press release from the fund house, no single stock shall have more than 33% weight, and the weight of the top 3 stocks cumulatively shall not be more than 62% at the time of rebalancing. The index is rebalanced semi-annually in March and September.

Speaking on the launch of the product, Chintan Haria, Head – Product Development & Strategy, ICICI Prudential Mutual Fund said, “In terms of volume, by 2030, India is expected to be the world’s third-largest automotive market. We believe through this fund investors will be able to tap into the evolving space of the Indian automobile industry. With India being an emerging global hub for auto component sourcing coupled with the Government support for electric mobility, we believe this space is likely to be under the spotlight."

According to the fund house, while the auto industry is cyclical in nature, the profits of the companies in this sector rise or fall in line with consumer confidence. The industry has much higher return on capital employed (RoCE) and cash generation compared with other sectors. The fund house expects that as per capita income grows, penetration is likely to increase as affordability and income levels rise, leading to increased discretionary spending thereby supporting the sector.

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