Baroda BNP Paribas - Nifty 200 Momentum NFO |Baroda BNP

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Passive investing or index investing as it is commonly understood, is a long-term investment strategy that tracks / replicates a specified underlying market index.

EASY

Easy-to-understand investment strategy: Tracking or replicating a pre-specified benchmark/index as closely as possible

Rule-Based Investing

Index: A rule-based portfolio with stock/company selection based on pre-defined rules and free from any individual biases

Efficient

Efficient Investment: Portfolio reflecting the collective wisdom of the market with index performance subject to tracking error and expenses

Economical

Generally lower expense ratio than an active mutual fund scheme due to no active decision by fund manager.

Concept of Passive Investing - Factor Investing

Factors are unique characteristics attributed to the enhanced return and risk of an asset. They can be used as building blocks for portfolio improvement / enhancement. Some of the popular factors include Momentum, Value, quality, low volatility etc.

Momentum Investing - Price is God

Momentum is the tendency of something in motion to continue that motion.

In finance parlance: stocks that have moved up are expected to continue moving up and vice versa.

Price return is the only factor for investment as momentum investors “Buy High & Sell Higher”.

Momentum Factor assigns a momentum score basis returns for a certain period like 6M / 12M and stocks with highest score are selected for investment.

Why Nifty 200 Momentum 30 Index?

Consistent and significant outperformance against the Nifty 50 Index.

Source: Niftyindices.com, MFI explorer. Data as on Aug 31, 2024. Daily Rolling Returns calculated from 03-Apr-2005 to 31 Aug 2024. Above returns are CAGR (Compound Annual Growth Rate) returns. Baroda BNP Paribas Mutual Fund does not guarantee returns on investments in the scheme. Past performance may or may not be sustained in future and is not a guarantee of any future returns. Returns do not take into account expenses and taxes, if any. Nifty 50 being a broad market bellwether index and also recommended by AMFI as additional benchmark for all equity schemes has been used for comparison.

Introducing Baroda BNP Paribas Nifty 200 Momentum 30 Index Fund

Baroda BNP Paribas Nifty 200 Momentum 30 Index Fund is an index fund investing primarily in equity and equity related securities comprising the Nifty 200 Momentum 30 index. It employs a momentum investing philosophy wherein the index selects securities basis 6-month and 12-month price return adjusted for volatility.

Who Should Invest?

Long term investors looking for capital appreciation.

Investors seeking investments in equity and equity related securities replicating the composition of the Nifty 200 Momentum 30 Total Return Index with an aim to achieve returns of the underlying index, subject to tracking error.

Scheme Features

NFO Date	25-09-2024 to 09-10-2024
Minimum application amount	During NFO: Lumpsum investment: Rs. 1,000 and in multiples of Re. 1 thereafter. There is no upper limit. Ongoing basis: Lumpsum investment: Rs. 1,000 and in multiples of Re. 1 thereafter. SIP: (i) Daily, Weekly, Monthly SIP: Rs. 500/- and in multiples of Re. 1/- thereafter, (ii) Quarterly SIP: Rs. 1500/- and in multiples of Re. 1/- thereafter. Note: Allotment of units will be done after deduction of applicable stamp duty and transaction, if any..
Load Structure	Entry Load: Not Applicable Exit Load: 0.2% - if redeemed on or before 7 days from the date of allotment Nil – If redeemed after 7 days from the date of allotment
Plans & Options	Regular & Direct plans with Growth options
Benchmark	Nifty 200 Momentum 30 Total Return Index
Fund Manager	Neeraj Saxena

Risk Factors & Disclaimer: The Scheme being passively managed invests in stocks of the underlying index and will therefore be subject to the risks associated with concentration of investments in a particular company/sector.The index tracks the performance of 30 stocks from Nifty 200 index based on their normalized momentum score. The Normalised Momentum Score for each company is determined based on its 6-month and 12-month price return, adjusted for its daily price return volatility. The Scheme by mandate invests in stocks of the underlying index which represents the Nifty 200 Momentum 30 Index having 30 constituents and will therefore be subject to the risks associated with such concentration. The weightage of each stock is capped at the time of rebalancing of index, which may help in limiting concentration risk. In addition, the Scheme would be subject to risks associated with deterioration in the normalized momentum scores of the stocks between two index rebalancing dates. The risks associated with investments in equities include fluctuations in prices, as stock markets can be volatile and decline in response to political, regulatory, economic, market and stock-specific development etc. Please refer to scheme information document for detailed risk factors, asset allocation, investment strategy etc. Further, to the extent the scheme invests in fixed income securities, the Scheme shall be subject to various risks associated with investments in Fixed Income Securities such as Credit and Counterparty risk, Liquidity risk, Market risk, Interest Rate risk & Re-investment risk etc., Further, the Scheme may use various permitted derivative instruments and techniques which may increase the volatility of scheme’s performance. Also, the risks associated with the use of derivatives are different from or possibly greater than, the risks associated with investing directly in securities and other traditional investments. investor should consider their risk appetite at the time of investing in index funds. Please refer to Scheme Information Document available on our website (www.barodabnpparibasmf.in) for detailed Risk Factors, assets allocation, investment strategy etc.

NSE Disclaimer: The “Product” offered by “the issuer” is not sponsored, endorsed, sold or promoted by NSE INDICES LIMITED (formerly known as India Index Services & Products Limited (IISL)). NSE INDICES LIMITED does not make any representation or warranty, express or implied (including warranties of merchantability or fitness for particular purpose or use) and disclaims all liability to the owners of “the Product” or any member of the public regarding the advisability of investing in securities generally or in the “the Product” linked to Baroda BNP Paribas Nifty 200 Momentum 30 Index Fund or particularly in the ability of the Nifty200 Momentum 30 Index to track general stock market performance in India. Please read the full Disclaimers in relation to the Nifty 200 Momentum 30 Index in the in the Offer Document / Prospectus / Information Statement.

Scheme Documents

KIM and Editable Application Form
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SID
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Product Presentation
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Product one pager
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FAQs

What is Nifty 200 Momentum 30 Index?

The Nifty 200 Momentum 30 Index tracks the performance of 30 high momentum companies from the 200 largest companies by market capitalization listed on the National Stock Exchange. Companies are selected basis their normalized momentum score which is computed using 6-month and 12-month price return adjusted for volatility. All stocks that form a part of the index must also be a part of the Futures & Option Segment. The index is reconstituted twice a year in June and December.

Which companies form part of the Nifty 200 Momentum 30 Index?

Table containing details of the top 10 securities in the Nifty 200 Momentum 30 index is as below:

Security Name	(Weight %)
Trent Ltd.	6.3%
Tata Motors Ltd.	5.5%
NTPC Ltd.	5.4%
Bajaj Auto Ltd.	5.3%
Bharti Airtel Ltd.	5.3%
Coal India Ltd.	4.9%
Adani Ports and Special Economic Zone Ltd.	4.8%
Bharat Electronics Ltd.	4.6%
REC Ltd.	4.6%
Mahindra & Mahindra Ltd.	4.6%

Source: Niftyindices.com. Data as on Aug 31, 2024. The stocks/sector(s) mentioned in this document are of the index. It does not constitute any recommendation of the stocks/sectors and Baroda BNP Paribas Mutual Fund may or may not have any future position in these sector(s)/stock(s). Further, the portfolio of the Scheme is subject to changes within the provisions and limitations of Scheme Information Document (SID). For further details on asset allocation, investment strategy and risk factors of the Scheme please refer to SID available on our website (www.barodabnpparibasmf.in).

What is the performance of the Nifty 200 Momentum 30 Index?

The Nifty 200 Momentum 30 index has outperformed the Nifty 50 Index across most time frames both in point-to-point CAGR returns and average CAGR rolling returns:

Source: Niftyindices.com. Data as on Aug 31, 2024. Daily Rolling Returns calculated from 03-Apr-2005 to 31 Aug 2024. Above returns are CAGR (Compound Annual Growth Rate) returns. Baroda BNP Paribas Mutual Fund does not guarantee returns on investments in the scheme| Past performance may or may not be sustained in future and is not a guarantee of any future returns. Returns do not take into account expenses and taxes, if any. Nifty 50 being a broad market bellwether index and also recommended by AMFI as additional benchmark for all equity schemes has been used for comparison.

Why should one invest in Baroda BNP Paribas Nifty 200 Momentum 30 Index Fund?

Baroda BNP Paribas Nifty 200 Momentum 30 Index Fund tracks and replicates the Nifty 200 Momentum 30 index which selects 30 securities with the highest normalized momentum score out of the top 200 companies by market capitalization. The momentum scores are calculated using 6 month and 12 month returns and are adjusted for volatility. The index is reconstituted twice in June and December

What are Index Funds?

Index funds are a type of mutual funds that track / replicate a specified benchmark index. The list of indices can range from broad market indices like Nifty 50, Sensex to sector concentrated indices like Nifty Bank, Nifty IT and factor indices as well like momentum, value, low volatility etc.

An index fund tracks / replicates the specified benchmark index by buying securities comprising the index in the same weightage as that in the index. For e.g. Hypothetically, if XYZ stock has a weight of 10% in the Nifty 200 Momentum 30 Index, then a Nifty 200 Momentum 30 Index Fund will seek to hold 10% of its AUM in XYZ stock.

What is an Index?

A stock market index is a representative of a subset of securities that comprise the stock market. It helps investors to ascertain performance of the broad stock market by comparing current index levels with previous index levels.

An index is a hypothetical portfolio of securities that represent various segments of the financial markets. Indexes are constructed using pre-defined rules that govern security selection and their weights in the portfolio.

What are other types of passive investment options?

Passive investment options are broadly categorized in two segments: Index Funds and Exchange Traded Funds (ETFs). The underlying principle remains the same for i.e., both track / replicate the specified benchmark index by investing in securities comprising the index.

The difference between the two options is in the way they are administered. Index Funds are like traditional mutual funds in their administration. Investors can subscribe / redeem units with the AMC at Day end NAV

ETFs as their name suggest are listed on stock exchanges and are traded like shares. Investors can buy and sell units of ETFs on the exchange without coming to the AMC directly. AMCs will also appoint dedicated market makers for the ETF who will provide liquidity for the units on the exchange.

Detailed comparison between ETFs and Index Funds is as below:

Features	ETFs	Index Funds
Investment Strategy	Track / Replicate underlying index by investing in basket of securities comprising the index
How to Invest?	On the exchange like shares*	With the fund house like a normal fund
Intraday Trading	Possible as units are traded at near real time NAV	Not possible as units are allotted/ redeemed at closing NAV, subject to time of receipt of application
Liquidity Provider	Market Makers appointed by the fund house	The fund house
Investment Requirements	Broking + Demat account compulsorily required	Can be held in physical as well as demat form. Broking and demat account not compulsory
Cost of investing	TER + transaction costs	Fund TER (Direct / Regular Plan)
Mutual Fund Special Facilities	Not Available	Facilities like SIP, STP and SWP are available

How does an index fund work?

An index fund tracks / replicates the specified index by investing in securities comprising the index and in the same weight as the weight of the security in the index. For e.g. Hypothetically if XYZ has a weight of 10% in the Nifty 200 Momentum 30 Index, then a Nifty 200 Momentum 30 Index Fund will seek to hold 10% of its AUM in XYZ.

The index provider calculates the daily weight of the security in the index and releases the file to the AMCs who then use the file to rebalance their portfolio and align it with the index. Any addition / deletion of securities from the index are also intimated to the AMC by the index provider which then takes the necessary steps to buy or sell the respective securities.

What are benefits of Index Funds?

Easy-to-understand investment strategy: Easy to understand investment strategy. Tracking or replicating a pre-specified benchmark/index as closely as possible.
Rule Based Investing: An index is a rule-based portfolio with stock/company selection based on pre-defined rules and free from any individual biases.
Efficient Investment: Portfolio reflecting the collective wisdom of the market with market performance subject to tracking error and expenses.
Economical: Generally lower expense ratio than a traditional mutual fund due to no fund manager involvement in investment decision.
No Style Drift: A style drift is when a fund manager makes investment that are outside the fund’s defined investment style. For example, a large cap fund investing in small caps. Style drifts change the risk structure of the fund which the investor may not have signed up for but is exposed to, nonetheless. ETFs are by regulation required to strictly replicate the index with no active decision in security selection by the fund manager.
Diversification: Index Funds hold a basket of securities allowing for easy diversification in a single instrument.

Why do index funds have low expense ratio?

There is no active stock selection or investment decision requirement to be made by the fund manager in an index fund. This eliminates cost of fund manager and research analysts. Additionally, index funds tend to have less portfolio churn as compared to active funds resulting in saving on transaction costs. These costs which forms major portion of a fund’s expense ratio are eliminated resulting in index funds having a low expense ratio. Additionally, regulators have capped the Total Expense Ratio (TER) that can be charged by index funds to 1% of AUM.

How do index funds offer diversification?

An index is a rule-based investment portfolio constructed by defining various security selection parameters and then applying necessary filters for final security selection. In the case of broad market indices, security selection takes place from a large pool of stocks from various industries, sectors and geographical locations and having different sizes, business models and operational efficiencies.

Rules are also defined for the size of a security in the portfolio. The resulting broad market index by its nature is not only diversified across sectors and industries but also protected against concentration in a single security.

However, this diversification is only applicable for broad market indices and will not apply to sector focused or other specific custom indices due to the nature of such indices.

Does performance of index funds get affected by fund manager’s views?

An index fund manager does not take any active stock selection or view based investment decision. An index fund will not filter out securities from its specified index or take a defensive position in case of a market crash. An index fund seeks to track / replicate the index in its entirety at all points in time and is always completely invested except for cash held for subscription and redemption on that specific day. Any surplus cash held by an index fund must be deployed in the index immediately to ensure efficient replication of the index and to minimize tracking difference and tracking error.

How do index funds help in timely portfolio rebalancing?

An index is a rule-based investment portfolio with defined rules and criteria for inclusion and exclusion of securities as well as their weight in the portfolio. The indices are periodically reviewed by a committee that determines whether the requisite criteria are met and to take appropriate action in case of a company’s inability to meet the criteria.

The decision-making process eliminates any no emotions or biases and any addition, exclusion and rebalance takes place in a timely manner.

Who should invest in index funds?

Index Funds are an easy, efficient, and economical investment instrument catering to all types of investors. New investors will benefit from the easy-to-understand structure along with low costs and diversification benefits that an index fund offers. Experienced investors will benefit from using index funds in a core satellite portfolio construction approach with the bulk of their portfolio (core) in broad market index funds and the remainder portion (satellite) in riskier investments. However, investor should understand that the risk associated with index funds is high and should read the Scheme Information Document and consult their financial advisors before investing.

Do index funds beat the market?

The objective of index funds is to generate returns commensurate with the specified index that the fund is tracking / replicating subject to tracking error and expenses. By its nature, it will mostly underperform the index due to the tracking error and expenses. An index fund endeavours to generate benchmark return which is market return and will not beat the market.

Do index funds generate high returns?

Index funds generate returns commensurate with the specified index that the fund is tracking / replicating subject to tracking error and expenses. It will not endeavour to beat the market but to replicate the underlying index in its entirety.

What is tracking difference?

Tracking difference is the difference in the return generated by the index fund and the returns generated by the underlying index. For example, Hypothetically if Nifty 200 Momentum 30 Index has generated a return of say 10% in a year and the index fund tracking the index has generated a return of 9.5% in the same period, the tracking difference of the fund is 0.5%.

Tracking difference is an unavoidable part of index funds due to the fees and expenses charged by the scheme and cash held by the scheme. Tracking difference also occurs due to certain corporate actions like dividends or due to unavailability of securities for transaction.

What is tracking error?

Tracking error is a measure of deviation of fund returns from the benchmark returns. Unlike tracking difference which computes point to point returns and highlights difference of returns between fund and index, tracking error calculates standard deviation of daily difference in performance between the fund and index and highlights the annualized number which is known as tracking error.

Tracking error may be inferred as the mark of efficiency and consistency of an index fund with it indicating how closely the fund manages to track / replicate the index. A lower tracking error indicates the fund is consistent in replicating its portfolio with that of the index whereas a higher tracking error points to inconsistencies in benchmark tracking / replication.

Like tracking difference, tracking error is also unavoidable due to fees and expenses, cash held by the scheme, corporate actions like dividends and availability of securities required to replicate the index portfolio.

What are the main sources of tracking error and tracking difference?

The main sources of tracking error and tracking difference are as follows:

Fees and expenditure incurred by the scheme.
Cash held by the scheme.
Corporate Actions.
Unavailability of securities in the underlying index due to circuit filters, lack of liquidity.
Halting of trading in underlying securities by the exchange.
Delay in replicating the portfolio during times of high volatility and reconstitution / rebalancing of the index.
Rounding off securities for buying or selling as compared to the underlying index.
Methodology of calculation of settlement price of the index. The benchmark or underlying index reflects the Volume Weighted Average Price (VWAP) of securities in the last half hour. However, the scheme may buy and sell at different points in time during the trading session at the then prevailing prices which may not correspond to the closing prices on the exchange.

What is expense ratio?

Expense ratio is a fee charged by the mutual fund to cover their management, administrative, and other expenses. It is usually charged as a % of Assets Under Management (AUM). Index funds tend to have lower expense ratio as compared to active funds as there is no fund manager involvement in security selection in an index fund.

How to invest in an index fund?

One can invest in an index fund in a similar way to normal mutual funds i.e. by submitting the application form online or in physical to the AMC. One may contact their distributor or relationship manager for investing in an index fund as well. Finally, one can use the latest fintech platforms for investing in an index fund.

What are risks associated with Index funds?

The major risks associated with index funds remain the same as with any traditional mutual funds investing in the same asset class. All equity funds including equity index funds will be subject to the same risk and same goes for debt index funds. Additional risks involved with index funds include the following:

Tracking Error
Tracking Difference
Index related risk – Concerning rules for inclusion/exclusion of securities, maintenance of index etc.
Index Dissolution Risk
Management risk wherein the fund may not be able to fully replicate the index.
Concentration risk
Passive investment risk wherein the fund manager has to make the investment in the securities comprising the underlying index regardless of their investment merit.

Investors are requested to read the Scheme Information document for detailed information on the risk factors of the scheme.

How are index funds taxed?

Index funds are taxed basis the asset class that they invest in. Equity index funds will be taxed as per equity taxation and debt index funds will be taxed as per debt taxation.

Disclaimer

^The above product labelling assigned during the New Fund Offer (NFO) is based on internal assessment of the Scheme characteristics or model portfolio and the same may vary post NFO when the actual investments are made.
Offer of units of Rs. 10 each during the New Fund Offer period and continuous offer for units at NAV based prices

Baroda BNP Paribas Nifty 200 Momentum 30 Index Fund

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