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Banking on a niche market

The only possible advantage that the fund offers over the Nifty and the Sensex ETFs is that its investments will adhere to Islamic norms.

Fund facts

Offer open: Till 25 February
Scheme type: Open-ended exchange traded fund
Minimum investment: Rs 10,000; unit price: Rs 10
Loads: Entry load: 1.5%; Exit load: Nil
Options: Growth
Investor grievances: Tel: 022-66512727; Fax: 022-22003412, E-mail: webmaster@benchmarkfunds.com

Fund stats


Objective: To provide capital appreciation by investing in securities that are constituents of the S&P CNX Nifty Shariah Index in the same proportion as in the index.
Benchmark: S&P CNX Nifty Shariah Index
Fund manager: Vishal Jain
Asset allocation: 90-100% Equity & equity-linked under s&&p cnx nifty shariah index, 0-10% cash


Comparable existing schemes:

Fund Name
NAV* (Rs)
6-month return (%)
1-year return (%)
ICICI Pru SPIcE Fund
95.9 -36.9 -49.8
Nifty BeES 281.3 -37.7 -48.7
                                                                                     *NAV as on 5 February 2009;. Source: NAVIndia

 

 

 

 

Fund prognosis

Idea distiller: The fund hopes to attract investments from the large Muslim population and Islamic institutions in India. More than the idea, it’s the new market that is driving the fund.

Fund house report: The Benchmark Mutual Fund manages assets worth Rs 1,903 crore across nine funds (as on 31 January 2009).
Returns profile: 3/5
Risk profile: 3/5

Fund manager's report:
Returns profile: 3/5
Risk profile: 3/5

Scheme DNA: Four fundamentals of the fund scheme

Unique idea: Medium
Returns possibility: Medium
Risk: Medium
Capability/complexity: Medium

Investor takeaway

Who should apply: The offer document shows that the P/BV of the Shariah Nifty Index is lower than that of the Nifty. Ditto for the dividend yield and P/E. The only possible advantage that the fund offers over the Nifty and the Sensex ETFs is that its investments will adhere to Islamic norms. So, unless you were waiting for a Shariah-compliant fund, this offering is not for you.

Comments:
Though the Shariah category is popular in West Asia and Malaysia, it is too niche a market and, perhaps, too early for India.