SBI Mutual Fund is in the launch phase of the SBI automotive opportunities fund. This unique active fund is offering investment opportunities in automobile and allied business activities theme.
SBI automatic opportunities fund NFO is open for subscription from 17th May to 31st May 2024 ( NFO period)
SBI Automotive Opportunities Fund Review is India’s first active mutual fund scheme built around the domestic automotive and allied business activities theme.
There are other funds available in auto-themed schemes such as ICICI Prudential Nifty Auto Index Fund, ICICI Prudential Nifty Auto ETF, Nippon India Nifty Auto ETF and an auto-themed overseas scheme – Mirae Asset Global Electric & Autonomous Vehicles ETFs, which invests in global companies only.
Table of Contents
Why Automotive Opportunities Fund?
The one obvious reason is to increase assets under management. Every new offering brings in some sensation in the market and new money is invested. Anyway, this is the story with all NFOs but why new funds in the automotive business?
A few apparent reasons that has led SBI Mutual Fund to come up with this thematic scheme:
The main reason may be the strong performance and projections of India’s auto sector and allied businesses. Let’s authenticate this with facts:
- The Indian automobile industry is the 4th largest automotive industry in the world in terms of sales, the largest tractor producer, 2nd largest bus manufacturer, and 3rd largest heavy truck manufacturer in the world.
- .India’s passenger car market is expected to grow at a CAGR of 9% till 2027 with a projection of significant growth in electric vehicles (EVs) in the next few years. In the US, the number of cars per 1000 people is 860, in Germany, it is 627 whereas in China the number is 223. In contrast, India still has around 34 cars per 1000 people.
- According to CII, the Indian electric vehicle market size is projected to grow from USD 3.21 billion in 2022 to USD 113.99 billion in 2029 at a whopping CAGR of 66.52%.
- Growing per capita income and a young and growing working-age population have contributed to India becoming the 4th largest automobile market in the world in terms of domestic sales.
- Also, India ranks as the 3rd largest automobile industry in the world in terms of production. The share of the automotive sector to India’s GDP has risen to 7.1% as of February 2023 from a mere 2.8% in 1992! This growth has also led to a positive spillover effect on the auto ancillary sector whose turnover has grown from US$39.05 billion in FY2016 to US$ 69.70 billion* in FY2023.
- The Nifty Auto TRI, which is the benchmark for all auto funds, including SBI’s NFO, has given an annualized total return of 23.32% in last five years. Moreover, passive auto funds have also done well in one year.
- A strong performance of the benchmark index i.e. Nifty Auto TRI has given a return of 71.7% in the last year, 33.9% in the last 3 years,23.3% in the last 5 years and more than 18% since inception.
SBI Automotive Opportunities Fund –NFO Details
The NFO opened on 17th May 2024 and it will remain till 31st May 2024.
Minimum Investment – During the NFO period, the minimum subscription amount required is Rs 5000 and in multiples of Re 1 thereafter.
Minimum SIP – Rs 500 in multiples of Re 1 thereafter
Investment Objective– Long-term capital appreciation via investing in equity and equity-related instruments.
Category – Thematic Fund
Exit load – On or before 1 year from the date of allotment 1% of the applicable NAV
Fund Manager– Tanmay Desai and Pradeep Kesawan.
Tanmay Desai (age 40) has around 15 years of work experience with over 6 years in Indian capital markets, worked as a Research Analyst with SBI Funds Management Ltd. He is currently managing the SBI Healthcare Opportunities Fund, which has given over 25% annualized returns in 5 years.
Pradeep Kesawan (age 44) is the second fund manager. Kesavan has over 18 years of experience in the financial services sector. He is currently managing overseas investments in the schemes of SBI Mutual Fund
Underlying Index
The Benchmark Index of SBI Automotive Opportunities Fund is Nifty Auto TRI. Since its inception, on July 12, 2011, this index has given an annualized total return of 18.06%.
The top five stocks in the index are Mahindra & Mahindra Ltd (19.54%), Tata Motors (16.80%), Maruti Suzuki (16.01%, Bajaj Auto (9.54%), Eicher Motors (5.96%).
Advantages and Disadvantages
By investing in the SBI Automotive fund, one can take advantage of investing in a promising theme. This theme may perform nicely based on the factors given above.
On the other hand, there are a lot of drawbacks, the majority of which are standard drawbacks associated with every new fund offer of a scheme; these include:
- No track record – Since the fund is new. No track record of the fund’s performance.
- Past performance- Performance of an underlying index is no guarantee of future returns
- Sectoral investment – these investments are highly specific and performance depends on sector performance.
- The scheme may not be suitable for every investor’s portfolio
- Highly specific funds – possess higher risk as compared to diversified funds
Conclusion – SBI automotive opportunities fund good or bad
This fund is suitable for Aggressive investors targeting long-term capital appreciation by investing in automotive and its allied business activities. Since it is a sector-specific theme-based investment, it possesses higher risk as compared to other equity mutual funds.
Suitable for people who want to take higher risks to get some better returns than other funds. People with low/moderate-risk appetite and who are dependent on the maturity of the fund should AVOID investing in the fund.
