Leverage India’s promising IT sector with the Axis Nifty IT Index Fund

India’s vibrant IT sector has become one of the most significant growth catalysts for the country’s economy, contributing significantly to the country’s GDP and public welfare.

As per NASSCOM, the IT industry is estimated to grow to 245 billion dollars, reflecting an incremental net revenue addition of $19 billion for the year. The sector also accounted for 7.4% of India’s GDP in FY22, and it is expected to contribute 10% to India’s GDP by 2025.

As innovative digital applications permeate sector after sector, India is now prepared for the next phase of growth in its IT revolution.

With the numbers and growth environment today being a clear reflection of the opportunity available to investors, Axis Mutual Fund has launched a brand-new offering - the Axis NIFTY IT Index Fund, an open-ended Index Fund tracking the NIFTY IT TRI that aims to replicate the market index to enable investors gain exposure to India’s IT sector.

In an engaging fireside chat, Ashwin Patni, Head Products and Alternatives, Axis AMC, spoke to YourStory about Axis Mutual Fund’s new scheme (NFO open from June 27 to July 11), and what it has to offer investors.

Here are the key takeaways:

Understanding the growth opportunity that India’s IT sector presents

“India’s IT and BPM exports have outperformed global IT services growth,” said Ashwin as he outlined the growth opportunity in the sector and how forecasts suggest acceleration in IT services spends in CY23.

While many industries are slowing, demand for Global IT services has grown significantly. Technology platforms like cloud computing, enterprise solutions, and AI are driving incremental growth for the sector. Indian companies, which have invested extensively in capabilities have seen larger client additions or order wins. Use of SaaS and other machine-driven services such as hyperscalers has grown exponentially. All of these have converged giving India an opportunity to become a hub for technology and innovation, as corporations look to adopt technology at a global scale.

Consequently, shares of some technology companies are now among the top gainers in the stock market. This explains how the IT sector has not lost its relevance since 2022 when it raced to the bottom of the market due to price corrections.

Core advantages that give the fund a distinctive edge over competitors

Patni also spoke about how the fund's sharp focus on the IT sector with exposure to strong IT companies with global presence, and NIFTY IT Index, which comprises the 10 largest IT companies by free float market capitalisation listed on NSE, gave it an edge as a fund.

“One of the most secular themes in the Indian markets is the IT theme,” he said, talking about the distinction between a broad-based diversified fund and a sectoral fund. He also explained how the sector has emerged as a winner among sectors with 10-year CAGR % and demonstrated consistent performance, which is ideal for long-term wealth creation.

“If you look back over the last 20 to 25 years, we've seen pretty secular growth in the IT sector. We've all seen how this sector transformed the Indian economy and services exports that we've generated. So, it's a theme that a lot of people are familiar with, and capable of relating to. That's where a product like this helps,” he added, talking about the macro factors that define the sector, including growth through the past one to two quarters, order bookings holding up well, and an expected recovery in revenue momentum from the second half of FY24.

“At Axis AMC, we stand for really true-to-label products and a high-quality execution. We are also extremely focused on minimising risk in every aspect of our process and running very tightly managed portfolios, as far as tracking is concerned,” he said, explaining what sets Axis Nifty IT Index Fund apart from the rest.

Leveraging the potential of India’s IT sector

As an open-ended index fund tracking NIFTY IT Index, the Axis NIFTY IT Index Fund seeks to track returns by investing in a select basket of Nifty IT TRI stocks, and aims to achieve returns of the stated index, with consideration for tracking errors. This fund is suitable for investors who are seeking a long-term wealth creation solution. For example, in this case, only the top 10 IT companies are a part of the index.

“With an active portfolio, you constantly revisit the companies on a daily, weekly or monthly basis. Passive portfolios, on the other hand, are relatively stable, and the baskets tend to be fairly stable over a period of time,” said Patni, talking about the key benefits and reasons for popularity of the passively managed index funds.

“Given that this is a passive product, what we're really trying to do as a fund manager is actually making sure that we run a very, very efficient product that closely replicates the underlying index as far as possible, with minimal tracking error,” he said.

“I believe that when investors invest in Axis funds, this fund in particular, they have the comfort of getting something very close to the basket, and with an extremely sharp focus on efficient execution and minimising tracking error,” he added.

How to invest in the Axis Nifty IT Index Fund

With the NFO open from June 27 to July 11, 2023, Patni also spoke about how its minimum initial investment amount of just Rs 5,000 making the fund a truly cost-effective investment option for all classes of investors.

“One can invest in the fund through the app or website or distributors or investment advisors,'' he added, speaking about how investors could access the fund, based on their comfort level.

^{Source: AMFI, NASSCOM}

^{Product Labelling and Riskometer:}

^{Axis Nifty IT Index Fund (An open ended Index fund tracking the NIFTY IT TRI)}

^{*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.}

^{(The product labelling assigned during the New Fund Offer is based on internal assessment of the Scheme Characteristics or model portfolio and the same may vary post NFO when actual investments are made)}

^{About Axis AMC: Axis AMC is one of India`s fastest growing assets managers offering a comprehensive bouquet of asset management products across mutual funds (https://www.axismf.com/), portfolio management services and alternative investments (https://www.axisamc.com/homepage).}

^{NIFTY Indices Disclaimer: The Axis NIFTY IT Index Fund (Products) are 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, to the owners of the Axis NIFTY IT Index Fund or any member of the public regarding the advisability of investing in securities generally or in the Product(s) particularly or the ability of the Nifty IT TRI to track general stock market performance in India. The relationship of NSE INDICES LIMITED to the Issuer is only in respect of the licensing of the Indices and certain trademarks and trade names associated with such Indices which is determined, composed and calculated by NSE INDICES LIMITED without regard to the Issuer or the Product(s). NSE INDICES LIMITED does not have any obligation to take the needs of the Issuer or the owners of the Product(s) into consideration in determining, composing or calculating the Nifty IT Index. NSE INDICES LIMITED is not responsible for or has participated in the determination of the timing of, prices at, or quantities of the Product(s) to be issued or in the determination or calculation of the equation by which the Product(s) is to be converted into cash. NSE INDICES LIMITED has no obligation or liability in connection with the administration, marketing or trading of the Product(s). NSE INDICES LIMITED do not guarantee the accuracy and/or the completeness of the Nifty IT TRI or any data included therein and NSE INDICES LIMITED shall not have any responsibility or liability for any errors, omissions, or interruptions therein. NSE INDICES LIMITED does not make any warranty, express or implied, as to results to be obtained by the Issuer, owners of the product(s), or any other person or entity from the use of the Nifty IT TRI or any data included therein. NSE INDICES LIMITED makes no express or implied warranties, and expressly disclaim all warranties of merchantability or fitness for a particular purpose or use with respect to the index or any data included therein. Without limiting any of the foregoing, NSE INDICES LIMITED expressly disclaim any and all liability for any claims, damages or losses arising out of or related to the Products, including any and all direct, special, punitive, indirect, or consequential damages (including lost profits), even if notified of the possibility of such damages. An investor, by subscribing or purchasing an interest in the Product(s), will be regarded as having acknowledged, understood and accepted the disclaimer referred to in Clauses above and will be bound by it.}

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