Nippon India MF launches Nifty CPSE Bond Plus SDL ETF

Nippon India MF is all set to launch a target-date bond exchange-traded fund (ETF) viz. Nippon India ETF Nifty CPSE Bond Plus SDL – 2024 Maturity.

This bond ETF is an open-ended target maturity ETF that will predominately invest in the constituents of Nifty CPSE Bond along with state development loans (SDL) with September 2024 maturity. It would be an index of 50:50, which means that it will invest 50 per cent of the assets in Nifty CPSE Bond & the rest 50 per cent in SDL and hold it until maturity i.e. till 2024. The type of bond ETF is something similar to Edelweiss’ Bharat Bond ETF with varied target maturity dates.

The new fund offer (NFO) is set to open for subscription on November 3, 2020, and would close on November 9, 2020. The minimum investment ticket size during NFO is Rs 5,000 and in multiples of Re 1, thereafter.

Being a target maturity ETF, the maturity of the scheme is expected to be no greater than 4 years from the date of inception of the scheme. Therefore, this would work something similar to that of fixed maturity plans (FMP). However, the only difference is that, in the case of ETF, you can exit the scheme at any point in time by selling it on exchange. Further, the cost too would be quite less.

The scheme is expected to provide investment returns that closely correspond to the total returns of the securities as represented by Nifty CPSE Bond Plus SDL September 2024 50:50 Index before expenses and is subject to tracking errors. This ETF provides exposure to a diversified basket of AAA-rated CPSE Bonds as well as state development loans.

Having said, at current yields, it is not looking very attractive as it is not likely to beat inflation. Even a further rate cut is still not expected. Hence, post-tax returns of a mere 5 per cent would not able to beat inflation. Hence, at this point in time, Nippon India Nifty CPSE Bond Plus SDL September 2024 can only be used to reduce the volatility of the portfolio.