ICICI Prudential Mutual Fund launches Indias first Auto ETF

The Nifty Auto Index is designed to reflect the behaviour and performance of the Automobiles segment of the financial market.

ICICI Prudential Mutual Fund has launched India’s first Auto ETF namely ICICI Prudential Nifty Auto ETF. The offering aims to provide returns that closely correspond to the total return of the benchmark Nifty Auto Index subject to tracking errors. The scheme will provide exposure to the top 15 companies representing auto-related sectors like Automobiles 4 wheelers, Automobiles 2 and 3 wheelers, Auto Ancillaries and Tyres. 

From an industry perspective, auto is cyclical in nature i.e, it closely follows the various phases of the economic cycle. The profits of the companies that operate in this space rise or fall in line with consumer confidence. However, this is one industry that boasts of a much higher return on capital employed (RoCE) and cash generation compared with other sectors, attributable to good margins and higher asset turnover. Some of the factors which augur well for the sector is the growing average household income leading to higher purchasing power, availability of skilled labour at relatively lower cost, presence of robust research and development centres aiding in sector growth and supportive Government policies for boosting electric mobility in the country.    

 The Nifty Auto Index is designed to reflect the behaviour and performance of the Automobiles segment of the financial market. The universe for the offering is Nifty 500. No single stock shall be more than 33 per cent and weights of the top 3 stocks cumulatively shall not be more than 62 per cent at the time of rebalancing. The index is rebalanced semi-annually in March and September respectively. The index has generated an average ten-year rolling return of 17.81 per cent from the start of 2004 to November 2021. 

The fund manager for this ETF is Kayzad Eghlim and Nishit Patel