Tata Asset Management has launched the Tata Nifty Midcap 150 Index Fund, an open-ended scheme designed to replicate the performance of the Nifty Midcap 150 Index (TRI). The New Fund Offer (NFO) is open for subscription from June 2, 2025, to June 16, 2025. This fund provides investors with a cost-effective and transparent way to participate in the growth potential of India's midcap segment.
The primary objective of the fund is to generate returns that closely align with the performance of the Nifty Midcap 150 Index (TRI), before accounting for expenses, while maintaining a minimal tracking error. However, the fund's objective is not guaranteed. The fund will invest at least 95% of its total assets in stocks that constitute the Nifty Midcap 150 Index. The remaining assets may be invested in debt or money market instruments to meet liquidity and expense requirements. The fund will follow a buy-and-hold strategy, with rebalancing done when necessary, and may use derivatives for efficient portfolio management.
The Nifty Midcap 150 Index includes 150 mid-sized companies, ranked 101st to 250th by market capitalization within the Nifty 500 universe, across various sectors. These companies are considered to be agile, growth-oriented, and have the potential to become industry leaders. Historically, midcap companies have demonstrated the potential to outperform large-cap and small-cap companies. As of April 2025, the midcap index delivered a 21.89% 1-year rolling return, compared to 16.37% by the Nifty 50. Over a 3-year rolling return period, midcaps returned 15.8% compared to 12.38% by large caps.
The fund managers for the Tata Nifty Midcap 150 Index Fund are Kapil Menon and Rakesh Prajapati, who bring a combined experience of over 40 years to the table.
Key features of the NFO include:
The fund offers diversification across 74 industries, including sectors not typically represented in large-cap indices, such as chemicals, realty, and capital goods. Moreover, it spreads risk by investing in a basket of stocks rather than a single stock.
Potential risks associated with the fund include tracking errors due to timing and price differences during trade execution, illiquidity in certain midcap stocks, market volatility, and the impact of inclusion/removal of stocks in the index. The fund aims to mitigate tracking errors by closely monitoring the portfolio, promptly rebalancing to mirror index changes, and using derivatives for efficient portfolio management. The AMC will regularly monitor and report the tracking error, striving to keep it below 2% based on rolling one-year data.
This fund is suitable for investors seeking long-term capital appreciation through equity exposure, who prefer passively managed, index-linked investments, and are looking to invest in midcap stocks without the risks associated with active stock selection.
