Mirae Asset launches India's first EV fund. Can it be a profit generator?

Electric vehicles (EVs) are no longer a concept of the future. They are rapidly revolutionising the automotive industry today. To capitalise on this theme, Mirae Asset Investment Managers is launching a fund that will invest in companies involved in electric vehicles and other new-age automotive developments like hybrid vehicles.

The fund will track the Nifty EV and New Age Automotive Total Return Index (TRI) and remain open for subscription until July 5, 2024.

Here is the fund in a snapshot:

About the index

Since Mirae Asset Nifty EV and New Age Automotive ETF will be holding company stocks present in the Nifty EV and New Age Automotive Total Return Index to generate returns, let us learn more about it.

Launched just a month back on May 30, 2024, the Nifty EV and New Age Automotive Index is home to 33 companies that are involved in the production and supply of electric or new-age automotive vehicles, batteries, components, raw materials, and technology. For your reference, Mahindra & Mahindra , Bajaj Auto and Maruti Suzuki India are the top three constituents of the index, with a combined weight of 24.11 per cent.

Further, automobiles and auto components' stocks dominate the index with around 71 per cent, followed by information technology (IT) and chemicals with 11.52 per cent and 8.24 per cent, respectively.

That said, the total exposure to automobile manufacturers will be capped at 40 per cent at the time of index rebalancing. The remaining 60 per cent will be towards segments like auto ancillaries, batteries, battery chemicals, automation, connectivity, etc.

Mirae Asset Nifty EV and New Age Automotive ETF will also include companies receiving production-linked (PLI) incentives in the automobile and battery segments and those participating in industry initiatives such as faster adoption and manufacturing of hybrid and electric vehicles (FAME).

Performance
While the Nifty EV and New Age Automotive TRI is a newbie, most of the companies in the index have been around for some time. So, we decided to compare their returns against the Nifty Auto Index and the broader Nifty 500 index over short (one year), medium (three years) and long term (five years).

The Nifty EV and New Age Automotive Index has outperformed the Nifty 500 but lagged the Nifty Auto Index over a one-year period.

However, over five years, the Nifty EV and New Age Automotive Index has delivered a robust 30.7 per cent annualised return, outperforming both the Nifty 500 (17.9 per cent) and Nifty Auto Index (24.9 per cent).

About the fund managers

Ekta Gala and Akshay Udeshi will manage the fund.

Gala has over six years of experience as a dealer. Previously associated with ICICI Prudential Asset Management Company (AMC), she currently manages 21 passive schemes at Mirae Asset AMC.

Udeshi has over four years of experience in financial services. He has been with Mirae Asset AMC since June 2021. Previously associated with Reliance Retail and L&T Financial Services, Udeshi currently manages four passive schemes, including Mirae Asset's gold and silver ETFs.

Should you invest in this ETF?

The Nifty EV and New Age Automotive TRI has delivered excellent returns in the medium to long run.

However, this index is new, and auto funds are sectoral in nature. They are highly volatile and have periods of consolidation.

Investors would be better off choosing diversified equity funds like multi-cap or flexi-cap funds, as they invest across various sectors, including the auto sector. For example, the top 15 stocks in the EV index are already present in several flexi-cap schemes, which will help you gain exposure to EV companies.

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