ICICI Prudential Nifty Index Fund.

By investing in nearly all equities at roughly the same weight as they do in the index, the program seeks to follow the effectiveness of the Nifty 50 Index closely.

Investment goal and benchmarks.

An open-ended index-linked growth strategy that aims to replicate the performance of the Nifty 50 by making investments in a selection of firms that make up the aforementioned index. The goal of the scheme is to invest in companies whose securities are listed on the Nifty index and susceptible to tracking flaws to closely match the results of the aforementioned index. To achieve this, investments in nearly all of the stocks that make up the Nifty 50 would be made at a weighted average rate.

The scheme won’t try to surpass or lag the Nifty 50. The goal is for the NAV of the scheme to roughly mirror the Nifty 50’s performance throughout the same period. Furthermore, there is neither a promise nor a certainty that the scheme’s investment goal will be realized.

The open-ended large-cap equity program known as the ICICI Prudential Nifty Index Fund is run by the ICICI Prudential Mutual Fund House.

On February 26, 2002, the fund was established.

It is compared to the NIFTY 50 Total Return Index as a benchmark.

• The ICICI Prudential Nifty Index Fund’s current net asset value as of June 22, 2022, is Rs 151.5241 for its regular plan’s growth option.

• The fund fell 0.26 percent short of its one-year target, 10.65 percent short of its three-year target, 10.84 percent short of its five-year target, and 14.43 percent short of its ten-year target.

• For the same period, divisional values are: -0.79% (1 year), 10.74% (3 years), and 10.27% (5 years).

• As of May 31, 2022, the ICICI Prudential Nifty Index Fund had a capital base totaling Rs. 3024.88 crore.

• Exit Load: There is no exit load for the given fund.

• The needed minimum investment is Rs. 100, and the required minimum additional investment is Rs. 100. The SIP investment minimum is Rs 100.

The ICICI Prudential Nifty Index Fund’s portfolio composition and asset allocation

The fund’s asset allocation is made up of around 99.81 percent stocks, 0.0 percent debt, and 0.19 percent cash flows.

The top 3 sectors make up about 65.76 percent of the assets, compared to the top 10 equity holdings, which make up about 58.77 percent.

The fund mostly invests according to an improvement philosophy, with about 0.0 percent going to giant and large-cap corporations, 0.0 percent to mid-level companies, and 0.0 percent to small-cap companies.

The expense ratio of the ICICI Prudential Nifty Index Fund is 0.5.

The annual fees required to be paid to the mutual fund company for managing your assets in that fund are referred to as the expense ratio for ICICI Prudential Nifty Index Direct Plan-Growth or any other mutual fund.

As of June 24, 2022, the ICICI Prudential Nifty Index Direct Plan Growth’s expense ratio was 0.18 percent.

As of March 31, 2022, the profit margin of the fund for the regular plan was 0.4 percent.

The ICICI Prudential Nifty Index Fund is a mutual fund that invests in the ICICI Prudential Nifty Index.

The minimum investment for both SIP and lump-sum payments is INR 100. There is no lock-in period for ICICI Prudential Nifty Index Plan Direct-Growth.

The ICICI Prudential Nifty Index Fund has tax implications.

• If units are sold within a year of purchase, gains are subject to a 15% short-term capital gains tax (STCG).

• Gains from assets cashed after one year of investment that total up to Rs. 1 lakh in a fiscal year are non-taxable.

• Long-term capital gain tax, or LTCG, would be levied at a rate of 10% on gains above Rs. 1 lakh.

• The dividend income from this fund will be added to the investor’s income for Dividend Distribution Tax and taxed by the investor’s tax brackets.

• Furthermore, if the fund house’s dividend income exceeds Rs 5,000 in a fiscal year, it must deduct a 10% TDS.

Strategies for Risk Management.

The Fund will make an effort to manage the risks involved in investing in the equity and debt markets by employing a comprehensive risk management strategy.

Through the use of various risk measurement methods, the risk is identified and measured as part of the risk control process.

The following risks associated with buying equities and debt securities have been identified by the Fund, and to address them, risk management procedures have been developed and integrated into the investment process.

Risk Factors of the ICICI Prudential Nifty Index Fund

Investment risks such as trading volume, settlement risk, liquidity risk, default risk, and potential principal loss are present when purchasing ICICI Prudential Nifty Index Mutual Fund units.

The value of your investment in the scheme may increase or decrease as a result of changes in the price, value, or interest rates of the securities in which it invests.

The scheme’s name in no way denotes the scheme’s caliber or its chances for future growth and profits.

The current program is not a program with a promised or assured return.

The level of interest rates, other market-related elements and trade volumes, settlement times, and transfer processes are only a few examples of factors and forces that can have an impact on the NAV of the Scheme.

There can be no absolute certainty that the goals of the scheme will be accomplished because market risks apply to all investments in mutual funds and securities.

The time taken by the scheme for the liberation of units may be noticeable or may also result in delays in the repentance of the units in the event of an excessively large number of redemption requests or a restructuring of the scheme’s portfolio. This is because the liquidity of the schemes’ investments may occasionally be constrained by trading volumes and settlement periods.

In light of this, the trustee has the discretionary power to restrict redemptions in specific situations.

Regardless of its investment strategy, the scheme’s risk may rise or fall.

The scheme wants to invest a lot of money in equities and securities that are connected to equity.

The scheme will also invest in debt and money market securities, albeit at a smaller level.

The scheme could lose out on some investment opportunities if it is unable to complete its planned purchases of securities due to clearance issues.

By the same reasoning, if an eventual undervaluation of the securities held in the schemes’ portfolio occurred, the refusal to sell securities held in the portfolio of the schemes due to the lack of an evolved and liquid secondary market for debt securities could occasionally lead to possible losses to the schemes.

Given the lack of liquidity in the stock futures/spot market, it will be challenging to complete the square-off transaction in the event of unexpected conditions.

The scheme will try to only invest in liquid stocks where there is little chance of losing money on the transaction.

In light of the fully diversified risk level, the AMC may decide to invest in lower-rated or unrated assets that offer greater yields. The risk to the portfolio could rise as a result.

Market Risk

• The NAV of the scheme will respond to changes in the stock market.

• The NAV of the scheme may fluctuate in response to events and perceived trends in stock price movements, which could cause the investor to lose money over brief periods and a longer period during market downturns.

The risk of settlement

• Unexpected events may occasionally cause settlement timeframes to be greatly lengthened.

• If the scheme is unable to purchase the securities it intends to due to settlement issues, it may lose out on certain investment opportunities since, in some cases, settlement timeframes may be dramatically lengthened by unforeseen events.

• Akin to this, the inability to sell securities kept in the scheme portfolio could occasionally result in potential losses for the scheme and a subsequent drop in the value of the investments held there.

Concentration Risk in the Portfolio

• The Scheme will consequently be vulnerable to the risks related to such concentration to the degree that it may concentrate its investments in the securities of certain companies or sectors.

• Furthermore, the scheme may be subject to higher levels of volatility and risk than would be typical in a more diverse fund portfolio of equity securities.

• Even when the investment aim is more general, these risks may have an influence on the scheme to the extent that it invests in specific businesses or industries.

The investment is passive.

• The scheme is not being managed actively.

• A broad fall in the Indian markets that are related to the underlying index could have an impact on the scheme.

• Regardless of their investment quality, the scheme makes investments in the securities represented by its underlying index.

• The AMC does not make an effort to pick stocks on an individual basis or to take protective positions in bear markets.

The risk of volatility

• The value of securities, derivative contracts, and other instruments connected to the equity markets may move substantially day to day due to the volatility of the equity and derivative markets.

• The value of investments made in the scheme could decline as a result of this volatility.

Risk in the Rate of Interest

• Changes in interest rates will have an impact on the scheme (s), to the extent that they are invested in debt and money market instruments.

• Interest rates are expected to fall, whereas an increase in interest rates would harm the scheme’s NAV.

The risk of liquidity

• Depending on market conditions, the security’s liquidity may change, which could alter the liquidity premium associated with the security’s price.

• The portfolio’s value may decrease if the security is sold at a time when it is becoming illiquid.

Credit Danger

An issuer’s failure to make interest and principal payments on its liabilities, as well as the market’s opinion of the issuer’s credibility, are risks associated with investments in fixed income instruments.

Price Risk

• Just like any other fixed-income instrument, government securities that promise a fixed return are subject to price risk.

• Fixed-income security prices typically decrease as interest rates rise and rise when interest rates fall.

• The current coupon, the number of days to maturity, and the level of interest rates all affect how much prices will fall or climb.

• The new interest rate is defined by the rate at which the government issues new debt and/or the prices at which the market has been transacting in existing securities.

• The price risk is not specific to government securities. For all fixed-income securities, it is present.

• Government securities, on the other hand, are distinctive in that their credit risk typically stays at zero. As a result, the only factor affecting their prices is a change in the financial system’s interest rates.

The reinvestment risk is

• This risk relates to the levels of interest rates used to reinvest cash flows from the securities in the scheme.

• The “interest on interest” component is the extra income from investing.

• The possibility exists that intermediate cash flows will not be able to be reinvested at the anticipated rate.

The risk of settlement

• The scheme could lose out on some investment opportunities if it is unable to complete its planned purchases of securities due to settlement issues.

• For the same reason, the impossibility of selling assets contained in the portfolio of the schemes owing to unrelated circumstances that may affect liquidity could occasionally result in possible losses to the plan if the value of the securities held in the portfolio declines later.

Regulatory Risk

• The returns to investors in the scheme could be impacted by changes to tax laws that apply to mutual funds as well as broader changes in government policy.

Derivatives Risk

• Any delays in receiving cash and scrip IDCW and subsequent delays in reinvesting them, including any delays in the settlement and realization of sale proceeds, the registration of any transferred securities, or the purchase or sale of shares caused by a lack of market liquidity, will be charged to the CFO.

• The possibility exists that the portfolio could suffer a loss as a result of another party’s inability to uphold the conditions of the derivative contract.

• The danger of mispricing or inaccurate valuation of derivatives as well as the inability of derivatives to fully correlate with underlying assets, rates, and indexes are additional risks associated with employing derivatives.

The risks involved in using derivatives are distinct from and possibly even larger than the dangers involved in making direct investments in securities and other conventional assets.

The following are possible risks that could arise specifically from a derivative strategy adopted by the fund manager:

• The market is lacking in prospects.

• Given derivatives’ inability to fully correlate with underlying assets, rates, and indexes, as well as the danger of mispricing or inaccurate valuation,

• Execution Danger: It is not necessary for the prices displayed on the screen to match those used during execution.

• Basis Risk: This risk arises when the derivative instrument used to hedge the underlying asset does not move in lockstep with it.

• Exchanges could impose one-sided margins, raise the initial margin, variation margin, or other types of margins on derivative contracts, or require that margins be made in cash.

• All of these could make it necessary to unwind holdings at a loss and could significantly affect returns.

Risk Monitoring

AMC’s capacity to attain a clear relationship with the underlying index of the scheme may be impacted by variables such as the fees and expenses of the scheme, corporate actions, cash balance, revisions to the underlying indices, and regulatory laws. As a result, the returns of the scheme could differ from those of its underlying index. The standard deviation of the difference between the index’s daily returns and the scheme’s NAV is known as “Tracking Error.”

Tracking mistakes can be caused by several things, including but not restricted to:

• Any delays in receiving cash and scrip IDCW, as well as subsequent delays in reinvesting them, will be charged to the CFO, including any delays in the settlement and realization of sale proceeds, the registration of any transferred securities, or the purchase or sale of shares caused by a lack of market liquidity.

• Circuit filters may cause a brief halt in the trading of securities.

• At the end of business hours, the underlying index reflects the prices of securities.

• However, the Fund may purchase or sell the securities at various moments during the trading session at the current values, which could not coincide with the exchange’s closing prices.

• The index service provider periodically reviews the stocks that make up the underlying index and has the option to add or remove new securities. The Fund will make an effort to reallocate its portfolio in such a case, but the available investment and disinvestment options might not immediately allow for an exact mirroring of the Index.

• The chance for transactions to go wrong can mean that the scheme didn’t buy shares at the right price to follow the index.

• maintain a sufficient amount of cash to cover redemptions, other liquidity needs, accumulated income before distribution, and incurred costs.

• The number of shares underlying the index was rounded off.

• Due to potential redemptions, fees, or stock splits concerning securities in the index, it’s feasible that part of the money won’t always be invested.

The scheme may be exposed to the risk of a deviation from the benchmark in the short to medium term.

Subjected to tracking error, the goals of the scheme are to strictly match the underlying index’s performance over the same period.

The scheme would dynamically align the portfolio with the index to maintain a minimal tracking error.

On any given day or over any particular period, the performance of the scheme could not match that of the underlying index.

The AMC would continuously monitor the tracking error of the scheme and would work to reduce tracking error as much as possible. Such tracking mistakes are not anticipated to surpass 2% annually under typical conditions. This could change, though, for the reasons listed above or for any other reason that might come up, especially when the markets are extremely volatile.