Kotak Nifty 200 Quality 30 ETF Filed Draft Papers With SEBI

Kotak Mahindra Mutual Fund has filed draft papers with SEBI for its new Exchange-Traded Fund (ETF), the Kotak Nifty 200 Quality 30 ETF. This open-ended scheme aims to mirror the Nifty 200 Quality 30 Index by investing in the same 30 stocks that make up the index, subject to tracking errors.

Listing and Trading

Upon launch, the ETF will be listed on the National Stock Exchange (NSE). Investors can trade units on the stock exchange like any listed security. To maintain liquidity, the asset management company will appoint at least two market makers.

For large investors and market makers, transactions can be conducted directly with the fund in “creation units” of 1,50,000 units per batch.

• NFO Price: ₹10 per unit
• Minimum Investment: ₹5,000 during the NFO
• Exit Load: None

Index Composition and Criteria

The Nifty 200 Quality 30 Index is derived from the Nifty 200 Index, selecting stocks based on three financial metrics:

• Return on Equity (ROE)
• Financial Leverage (Debt/Equity ratio)
• Earnings Growth Variability over the last five years

Stock weights in the index are determined based on quality scores and market capitalization, with a 5% cap per stock. The index undergoes semi-annual rebalancing in June and December.

Allocation and Strategy

The ETF will follow a passive investment strategy with the following allocations:

• 95%-100% in equity and equity-related securities from the Nifty 200 Quality 30 Index
• 0%-5% in debt and money market instruments

It will not actively pick stocks but will adjust holdings in line with the index composition.

Benchmark and Performance Tracking

The ETF’s benchmark will be the Nifty 200 Quality 30 Index (Total Return Index – TRI). While the fund aims to replicate the index, market fluctuations, liquidity issues, and tracking errors may impact actual performance.

Conclusion

Since this is a passively managed fund, returns are dependent on index movements. Investors should consider factors such as market volatility, liquidity risks, and tracking errors before investing. Units will be tradable on the stock exchange, but market demand will influence prices.

The fund is currently awaiting regulatory approval.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Mutual Fund investments in the securities market are subject to market risks, read all the related documents carefully before investing.