Tata Asset Management launches India’s first tourism index mutual fund

The minimum investment amount during the NFO period is Rs 5,000 and can be increased in multiples of Rs 1. There’s no entry load for investing in this NFO. An exit load of 0.25% of the applicable net asset value (NAV) will be applied if you redeem units on or before 15 days of allotment  

Here are the key points and implications of this new index fund:

Objective and Composition: The fund aims to track the performance of the Nifty India Tourism Index, comprising companies from the travel, tourism, and hospitality sectors. These sectors are identified as fast-growing due to increasing disposable incomes, evolving consumer preferences, and higher discretionary spending among Indians.

Sectoral Weightage: The fund allocates its investments across various segments within the tourism industry:

Hotels and resorts: 32%
Airlines: 19%
Restaurants: 19%
Tour and travel-related services: 16%
Airports and airport services: 10%
Luggage: 3%

This distribution reflects the fund's strategy to diversify within the tourism sector, capturing growth opportunities across different types of businesses.

Market Timing: The launch coincides with a period of economic resilience in India, driven by robust investment and consumption. The growing middle class is increasingly driving demand for aspirational and experiential travel, supported by improved infrastructure and accessibility due to expanded air routes.

Technological Influence: The fund acknowledges the impact of technology on the tourism and hospitality sectors, including online booking platforms for travel and reservations, as well as the rise of delivery services in the restaurant industry. Social media has also played a significant role in promoting travel experiences, further boosting consumer interest.

Financial Details: During the New Fund Offer (NFO) period, the minimum investment amount is Rs 5,000, with subsequent investments allowed in multiples of Rs 1. There is no entry load for investing in this NFO. However, an exit load of 0.25% of the applicable NAV will be charged if units are redeemed within 15 days of allotment.

Long-Term Growth Potential: With projections suggesting a substantial increase in India's travel and tourism expenditure—from $140 billion in 2019 to an estimated $406 billion by 2030—the fund aims to capitalize on this growth trajectory and provide investors with exposure to companies poised to benefit from these trends.

In conclusion, the Tata Nifty India Tourism Index Fund offers investors an opportunity to participate in the growth potential of India's dynamic tourism and hospitality sectors, leveraging favorable demographic trends, infrastructure development, and evolving consumer behavior.

Anand Vardarajan, Chief Business Officer, Tata Asset Management said, “High disposable income, infrastructure developments like better highway connectivity, improved railway comfort and speed and so many new airports have made travel easy, swift and safe. We are witnessing exponential growth in domestic aviation, hotels, restaurants, and travel which augurs very well for the tourism segment.”   

“All types of travel, be it a pilgrimage, business, medical or leisure are registering a surge. This makes a compelling case for looking at tourism as a segment and how one could invest and aim to benefit from the growth of this sector,” he said. 

The index methodology for the Tata Nifty India Tourism Index Fund, which comprises 17 stocks, ensures optimal representation of all tourism-related segments, with a maximum stock level capping limit of 20% in the index. This index can house a maximum of 30 stocks from the parent index Nifty 500.