Groww Mutual Fund files draft document with Sebi to launch an index fund

Groww Mutual Fund submitted draft documents with the Securities and Exchange Board of India (Sebi) on Tuesday for the launch of its index fund, the Nifty Total Market Index Fund.

The move follows Sebi’s recent decision to allow Zerodha to launch mutual fund schemes. Zerodha Fund House, a collaboration between leading brokerage firm Zerodha and fintech platform smallcase, is preparing to launch its first fund, which will be a passive fund benchmarked to the Nifty LargeMidcap250 index. It will also offer an ELSS variant called Zerodha Tax Saver (ELSS) Nifty Large Midcap 250 Index Fund and Zerodha Nifty Large Midcap 250 Index Fund (ZN250).

According to Motilal Oswal Asset Management Company (MOAMC), 61 per cent of investors have invested in at least one passive fund, underscoring the fast-growing adoption of passive funds in India. Revealing the reason investors choose to invest in passive funds, the survey point out that 57 per cent of respondents prefer these funds due to their low-cost nature as the biggest reason, followed by 56 per cent of respondents who feel that the simplicity of these funds is what pulls them to invest in them, and more than 54 per cent investors do so for the fact that they tend to deliver market returns.

As of July 31, 2023, the index assigns the highest weighting to HDFC Bank at 5.97 per cent, followed by Reliance Industries at 4.18 per cent, ICICI Bank at 3.39 per cent, Infosys at 2.35 per cent, and ITC at 1.99 per cent.

Groww and Zerodha’s decision to launch passive funds position them to offer products at more competitive price points compared to active funds, which typically require higher investments for research and fund management.