Kotak Mahindra Mutual Fund launches Nifty Alpha 50 ETF

It is An open-ended scheme tracking Nifty Alpha 50 Index.

Kotak Mahindra Mutual Fund has announced the launch of India’s first-ever Nifty Alpha 50 ETF, Kotak Nifty Alpha 50 ETF. It is An open-ended scheme replicating/tracking Nifty Alpha 50 Index. The investment objective of the scheme is to replicate the composition of the NIFTY Alpha 50 Index and to generate returns that are commensurate with the performance of the NIFTY Alpha 50 Index, subject to tracking errors.

What is Alpha?

• Jensen's measure is commonly referred to as alpha.
• Jensen's measure is the difference in how much a stock returns vs the overall market.
• It measures the return earned by a stock above or below that demanded by the market for its risk class.
• Alpha is thus also often referred to as “excess return” or “abnormal rate of return.”

Nifty Alpha 50 Index aims to measure the performance of securities listed on NSE with high Alphas. In order to make the 50 stocks index investible and replicable, criteria such as turnover and market capitalization are applied while selecting securities. Weights of securities in the index are assigned based on the alpha values. Security with the highest alpha in the index gets the highest weight. 

For companies to be eligible to be part of the index should be ranked within the top 300 companies by average free-float market capitalization and average daily turnover for the last six months. Besides, the company should have a listing history of one year and trading frequency should be 100 per cent in the last one year period.

In the last one year ending November 2021, this index has generated a return of 69 per cent compared to 25 per cent by the Nifty 50.

Nilesh Shah, Group President and Managing Director, Kotak Mahindra Asset Management Co Ltd said, “Our decision to launch Kotak Nifty Alpha 50 ETF comes at a time when the market has cooled down and valuations have eased. The diversified stocks in the ETF will be based on Kotak's well-defined strategy that will benefit investors over the long term”.