DSP Mutual Fund Launches DSP Nifty IT ETF, Offering Investors a Chance to Tap into the Indian IT Success

DSP Mutual Fund has introduced new fund offer of the DSP Nifty IT ETF, an open-ended exchange-traded fund that mirrors the performance of the Nifty IT index. This ETF presents investors with an opportunity to capitalize on the impressive growth of Indian IT companies in the long run. With a consistent track record of growth and a rising contribution to India’s GDP, the Indian IT sector has outperformed its global peers, solidifying its market share.

One of the key advantages of investing in the IT sector is its ability to provide exposure to global revenue flows, effectively diversifying equity portfolios away from domestic risks. Furthermore, Indian IT companies exhibit stronger financial strength with higher Return on Equity (ROE) and Return on Assets (ROAs) when compared to global counterparts. Additionally, attractive valuation parameters such as lower price-to-earnings ratios and price-to-book ratios make the sector relatively enticing.

Although the Nifty IT index has underperformed the Nifty 50 over the past 18 months, historical market cycles suggest a potential turnaround in performance. Moreover, the weightage of the IT sector in the Nifty 50 has fallen below its long-term average. On a rolling return basis, the Nifty IT index has surpassed the Nifty 50 across various timeframes ranging from one year to ten years. However, it is important for investors to acknowledge that the index poses concentration risks at both the sector and stock levels, potentially leading to higher volatility and drawdowns compared to diversified equity funds. In the short term, this fund may also underperform such diversified funds.

The New Fund Offer for the DSP Nifty IT ETF is available for subscription starting June 21, 2023, and will close on July 3, 2023.

“The Indian IT sector has been a consistent performer in the long term thanks to the global competitiveness and edge that they possess which also bodes well for the foreseeable future. Investors looking to benefit from this long-term growth story may consider investing in the Nifty IT index which is interestingly poised after underperforming in the recent past. We believe that at current levels, valuations are approaching average multiples, and many companies in this sector appear financially healthier and relatively cheaper when compared to global IT peers”, says Anil Ghelani, CFA, Head – Passive Investments & Products, DSP Mutual Fund.

Investors looking to participate in the Indian IT success story can seize this opportunity by exploring the DSP Nifty IT ETF.

Many mutual fund houses offer similar schemes that either passively track the Nifty IT Index or offer an actively managed portfolio of shares of Indian and overseas listed IT companies. Investors need to understand that this being a sector fund, the stakes are higher. Investors need to get the entry and exit right in such type of schemes to make money from their investment.