N100 – an Indian ETF, Invests in NASDAQ companies for Indian investors
Mutual Funds invest in various asset classes in Equity, debt and Gold. Each category has sub categories. For example, equity segment is further fragmented basis market cap (largecap, midcap, Smallcap) or Bond Funds (liquid funds, short term debt, long term debt, etc.) theme wise (pharma, banking, consumption etc). The beauty is this instrument can offer various colour and flavour to your portfolio and be beneficial for various goals across time frames.
One such section is international equities funds. Fund in question here is MOST Shares Nasdaq 100 – a less talked about category which moves independently of Indian market movements or even sector-specific movements. This fund invests all its assets in foreign equity markets. We are discussing here NASDAQ 100. One of the 3 most tracked Indices globally, comprises of 103 largest non-financial companies globally, listed in NYSE. Undoubtedly it is one of the most popular indices. Motilal Oswal launched this ETF Fund for retail investor in Mid march of 2011, with a minuscule AUM. Over the years it has given a consistent return and also got recognition from investors. This is a thematic fund indeed, the theme is foreign equity, underlying companies are technology, manufacturing, services, industries, retail, communications etc, excluding any financial services. With an AUM lesser than 300 crores, the fund size is not large if compared to Indian diversified market. This fund has given an unprecedented return since its inception year on year.
But How to invest in MOST Shares N100? N100, trailing the NASDAQ 100 which had a great run in US markets itself, barring some odd quarters in the last 5 years. In the same period, Indian IT sector scrambled to pull up its face. There are a more than a few reasons. The top 10 companies in the N100 portfolio include – Microsoft, Apple, Alphabet, Facebook, Intel, Cisco, Comcast, PepsiCo. Though on the surface, the top 10 companies are mostly tech-heavy, the businesses is varied. Apple – Consumer product, Alphabet and Facebook’s majority revenue come from marketing and consumer-based apps, Pepsico again is a global food and beverage leader. The players are not only big in US, but most also have a prominent mark globally and leveraging global market presence. Each one has a moat, it gives them a competitive advantage over other players, they are likely to stay above the crowd through various business cycles.
Apart from their strong year on year growth, there is another factor which works in favor of Indian Investors, that is depreciating rupee against Dollar. Though in dollar terms, NASDAQ 100 has given a compounding growth of 15% over 8 years, N100 has grown by 21 % CAGR in rupee term in the same years.
Who should Invest? This is a rare yet easy opportunity for Indian retail investors to own World’s most valued companies in an economic way. The ETF is available even a single unit in the BSE and NSE trading platforms. Hence the minimum investment is 1 unit (As on 1st Nov2019, it was trading at Rs. 570/ unit). An investor who has an existing portfolio in Largecap and midcap schemes can make some investment in this to add some colour to the portfolio. Like any equity fund, the investment horizon should be at least 5 years to realize the growth potential.
How to sell N100? It is as simple as selling any stock or ETF. The volume likely to be lesser than Equity, yet, it is not difficult like shallow secondary NCD/ Bonds market. Transaction is easy.
How is N100 Taxed? This fund won’t be taxed like equity Funds in India. This will be taxed like a bond, Debt mutual Fund or Gold ETF.
What is The cost? The Fund has managed to keep the expense ratio at 0.82%, aligned with the low ETF cost structre, which also contributes to better returns for the investors.
What are the risk involved in this?
The Fund carries the risks of Equity based mutual funds.
Additionally, Rupee appreciating against dollar likely to have a negative impact on the fund.
The negative performance of NASDAQ100 will have a direct impact, N100 is not comparable with Indian market data
The AUM of the Funds are low, high redemption may cause high NAV fluctuation and low liquidity in the fund
N100 is a cool ETF option which makes me say that –markets don’t fail to surprise me at any point. The various thoughts of how to generate profit in dull markets, hedge risk in an unprecedented situation often comes in mind, more often the thought that if retail investors can really make money? Yes that’s possible. N100 is one such mutual fund/ ETF of Motilal Oswal Fund house, not that popular in personal finance conversations, this 250 crore AUM Fund is silently taking advantage of the rupee dollar movement, investing in companies which middle class Indians can never think otherwise in their lifetimes. ‘Mutual Fund Sahi hai’ wave has overtaken many other ad campaign in past 2 years and rightly so, as it promotes a product for retail investors. The cost structure, investment amount and liquidity is commendable. But, which mutual Fund is Sahi for you, for your goal is an equally important topic to ponder on. Happy Investing