Investing in ICICI Prudential's Nasdaq 100 Index Fund NFO: Worthy Consideration?
**ICICI Prudential Nasdaq 100 Index Fund: A Tech-Heavy Investment Option for International Diversification**
Investors seeking to expand their portfolio beyond the Indian equity market may find the ICICI Prudential Nasdaq 100 Index Fund an attractive option. This fund, which is set to close for subscription on 11 October, offers access to a diversified portfolio of global technology companies.
The fund tracks the NASDAQ 100, a US stock exchange index that comprises the 100 largest non-financial companies globally. Notable tech giants such as Apple, Microsoft, Alphabet (Class C and A), Facebook, NVIDIA Corp, Tesla, Amazon, and Paypal are among the top holdings, constituting significant portions of the portfolio.
Over the past 3+ years, the fund has delivered impressive returns, with an average annual growth rate of approximately 15.48% and an absolute return of 578.38%. The fund's low expense ratio of 0.54% is also a significant advantage, making it relatively cost-effective for international/sectoral funds.
However, the fund's volatility is categorized as very high, due to the concentrated tech sector exposure and international currency fluctuations. Short-term capital gains are taxed at 20% if redeemed within 1 year, and long-term gains above ₹1.25 lakh are taxed at 12.5% per annum, which may diminish net returns for Indian investors.
The fund's concentration in large-cap US tech stocks also limits diversification across sectors and regions. Being about 3 years old, it has a shorter track record compared to more established funds.
For those looking for exposure to the US equity market but preferring a more diversified approach, investing in a fund based on a broader index such as the S&P 500 may provide better diversification. The S&P 500 index, which tracks the largest 500 companies listed on the US stock exchange, has a more balanced sector composition, with Information Technology accounting for just 28%, compared to 44% in the Nasdaq 100.
The ICICI Prudential Nasdaq 100 Fund is an open-ended index fund that will invest in the US equity market index, Nasdaq 100. The top 5 sectors in the Nasdaq 100 index are Information Technology (44%), Communication Services (29%), Consumer Discretionary (15%), Consumer Services (3%), and Industrials (2%).
The ICICI Prudential Nasdaq 100 Fund is a suitable choice for investors aiming for long-term growth with an appetite for risk and a focus on US technology giants. However, it is essential to consider the fund's high volatility and sector concentration risk, alongside tax considerations in India, before making an investment decision.
Investing in the ICICI Prudential Nasdaq 100 Fund allows investors to focus on the technology sector, as it provides access to a diversified portfolio of global tech companies. To diversify beyond the technology-heavy portfolio, one might consider investing in a fund based on a broader index, such as the S&P 500, which has a more balanced sector composition compared to the Nasdaq 100.
Despite the fund's advantageous low expense ratio and impressive returns, it is essential to weigh the potential risks, such as high volatility and limited sector diversification, as well as tax implications for Indian investors, before making an informed decision on finance and investing in the technology sector.
