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ICICI Prudential Nifty Metal ETF NFO will remain open for public subscription until August 12, 2024.
This ETF will be the first to focus exclusively on the metal sector, unlike previous funds that concentrated on both metal and energy sectors.
ICICI Prudential Nifty Metal ETF NFO snapshot
| NFO period | August 1 - 12, 2024 |
| Benchmark | Nifty Metal TRI |
| Fund managers | Nishit Patel and Priya Shridhar |
| Exit load | Nil |
| Tax treatment |
If units are sold within a year: 20 per cent capital gains tax.
If units are sold after one year: 12.5 per cent capital gains tax. (Gains up to Rs 1.25 lakh are tax-exempt) |
About ICICI Prudential Nifty Metal ETF's benchmark
Since ICICI Prudential Nifty Metal ETF will try to replicate the Nifty Metal Index, let us understand the latter in detail.
Launched on July 12, 2011, the Nifty Metal Index is currently home to 15 companies engaged in mining and processing various metals, selected based on free-float market capitalisation.
The index ensures that no company comprises more than 33 per cent of the index. Additionally, it maintains that the combined weight of its top three stocks does not exceed 62 per cent during rebalancing. The biannual rebalancing adjusts the index's composition based on current free-float market capitalisation.
Top 5 constituents of the Nifty Metal Index
| Name | Weight (%) |
|---|---|
| Tata Steel | 20 |
| Hindalco Industries | 14.4 |
| JSW Steel | 13 |
| Adani Enterprises | 12.2 |
| Vedanta | 11.2 |
| Source: Index factsheet | |
Performance of the metal index
The metal sector is highly cyclical. Demand for metals fluctuates wildly because it is closely tied to economic activity, infrastructure development and industrial production.
Additionally, metal prices are predominantly set on the international market, which exposes companies to global market dynamics and price volatility.
Such cyclicality is evident in the index's performance, which has often gone sub-zero multiple times based on five-year rolling returns.
Fund managers of ICICI Prudential Nifty Metal ETF
Nishit Patel and Priya Shridhar will jointly manage the ETF.
Patel has approximately four years of experience managing various index funds, ETFs and fund of funds (FoFs).
With around two years of experience, Shridhar has also managed numerous passive funds. Prior to her current role, she worked as a dealer at ICICI and ITI AMCs.
Should you invest in ICICI Prudential Nifty Metal ETF
There are two red flags. One, performance, or rather lack of.
Two, the index has only 15 companies, making it highly concentrated. That's not a good thing, as you will put all your hopes on the future of just 15 companies. Also, these companies belong to the same sector, making you even more reliant on the fate of the metal industry.
Our recommendation is to consider diversified equity funds, such as flexi- and multi-cap funds, which invest across various sectors.
That said, if you are optimistic about the metal sector, you could allocate a small portion of your investable money to this fund.
Also read: Ask these three questions before investing in an NFO
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