Auto ETFs from Nippon Life and ICICI Prudential mutual funds: Can they drive returns for investors?

Auto ETFs from Nippon Life and ICICI Prudential mutual funds: Can they drive returns for investors?

The auto sector continues to be badly hit by the COVID-19 pandemic. However, a few savvy investors have started talking about the segment as one with many potential value picks. Mutual fund houses such as ICICI Prudential and Nippon India have announced the launch of Nifty Auto ETF. Does it make a good investment choice?

What’s on offer

ICICI Prudential Nifty Auto ETF (IAUTO) and Nippon India Nifty Auto ETF (NAUTO) have opened today for subscription.

Both exchange traded funds (ETF) track the Nifty Auto Index and aim to generate returns in line with those of the benchmark.

This index has 15 stocks of companies manufacturing passenger vehicles, heavy commercial vehicles, two and three wheelers, tyres, batteries and forgings. No single stock can have a weight of more than 33 percent in the index. As on December 31, 2021, the top stock in the index is Maruti Suzuki India with 19.53 percent weightage. The top three stocks account for 52.49 percent of the assets. Over a five-year period, the Nifty Auto TRI has given 4.89 percent returns annually. The price to earnings ratio of index stands at 60.71. The index is rebalanced semi-annually.

What works

The auto sector has gone through tough times. In