India's First EV & New Age Automotive ETF on the Horizon: Mirae Asset Seeks SEBI Nod

The Electric Vehicle market is experiencing explosive growth. Analysts predict a surge from a few billion dollars in 2023 to over $7 billion by 2025, with ambitious targets like 10 million annual EV sales by 2030. This surge is fueled by a combination of factors: rising consumer interest in eco-friendly options, government incentives through schemes like FAME, and the growing availability of EVs from established players and new entrants like Maruti Suzuki and Tata.

However, challenges remain. Infrastructure development, particularly charging stations, needs to keep pace with the growing EV numbers. Additionally, a successful EV future hinges on a robust domestic supply chain, especially for advanced batteries. Despite these challenges, the Indian EV industry in 2024 is on a promising trajectory, poised for significant growth in the coming years.

This rapid expansion creates a lucrative space for mutual funds to invest in companies positioned to benefit from this growth. The 'New Age Automotive' segment encompasses advancements like connected cars, autonomous driving, and alternative fuels. This broader focus allows mutual funds to tap into a diverse pool of innovative companies driving the future of transportation in India.

By offering exposure to this multifaceted sector, mutual funds can cater to a wider range of investor interests. Mutual funds can leverage this opportunity through thematic ETFs (exchange-traded funds). These ETFs could track indexes focused on EV and new-age automotive companies. This allows investors to gain diversified exposure to this high-growth sector without the complexity of picking individual stocks.

Additionally, ETFs typically offer lower expense ratios compared to actively managed funds, potentially translating into higher returns for investors.

Recently, a key player from the mutual fund industry - Mirae Asset Mutual Fund has filed a draft document with SEBI for regulatory approval to launch India's first Electric Vehicles (EV) and New Age Automotive-focused exchange-traded fund.

Understanding the Nifty EV & New Age Automotive ETF

Mirae Asset's Nifty EV & New Age Automotive ETF is an open-ended scheme designed to replicate/track the Nifty EV & New Age Automotive Total Return Index. This index, managed by NSE Indices, comprises companies from the electric vehicle and new-age automotive sectors. The fund will track the newly launched Nifty EV & New Age Automotive Index, providing investors with a benchmark that accurately captures the inventiveness and progressive spirit of India's new-age automotive and electric vehicle sectors.

Apart from focusing on cutting-edge firms, the portfolio of the fund will encompass those that have been granted Production Linked Incentives (PLI) in the automotive and battery sectors, and those engaged in significant industry campaigns like the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) initiative by the government and the Society of Manufacturers of Electric Vehicles (SMEV).

[Read: Automobile Sector: Gear up Your Investment Portfolio with These Top 5 Mutual Funds]

Given that, Mr Swarup Anand Mohanty Vice Chairman & CEO at Mirae Asset Investment Managers (India) commented; "We believe that companies which are part of disruptive themes like EV hold significant potential for growth especially if they have the first mover advantage in less penetrated markets like India. The long-term potential and opportunity size for EV and several other disruptions in the auto space is huge. Through this product, we want to provide an option for investors to take exposure in a portfolio of such companies."

Benefits of Investing in thematic funds like Mirae Asset's Nifty EV & New Age Automotive ETF

• Capitalize on the EV Boom: The Indian EV market is projected to witness exponential growth in the coming years. The ETF allows investors to participate in this growth story without the need for individual stock selection.

• Diversification: The ETF offers instant diversification across various segments within the EV and new-age automotive space, mitigating risks associated with single-stock concentration.

• Cost-Effective Investment: Compared to actively managed thematic funds, ETFs typically have lower expense ratios, translating to higher returns for investors.

• Convenience and Liquidity: The ETF facilitates easy entry and exit through exchange platforms, offering investors greater flexibility in managing their investments.

Key Considerations

However, do note that while the Nifty EV & New Age Automotive ETF presents a promising opportunity, there are some factors for investors to consider. The EV sector is still in its nascent stage and can be susceptible to market fluctuations. Investors should be comfortable with a higher degree of volatility compared to established sectors.

Government policies and regulations play a crucial role in shaping the EV industry's growth trajectory. Investors should monitor any changes in government policies that might impact the sector. The ETF's performance will be directly linked to the performance of the companies within the Nifty EV & New Age Automotive Index. Investors should conduct due diligence on the underlying companies before investing.

Additionally, many other factors could have a bearing on the underlying index and its top constituents, which may impact the scheme's performance and may affect negatively if the sector moves out of favour.

To conclude...

Overall, the Indian EV and automotive industry in 2024 is a magnet for mutual funds seeking high-growth opportunities with a focus on diversification and capitalizing on a future-oriented market.

The fund house is awaiting SEBI's approval as this will be a good addition to the existing lineup of exclusive products on global and domestic themes. SEBI has to review the draft document, this process typically involves scrutiny of the investment strategy, risk factors, and compliance with regulations.

SEBI will officially announce its decision on the approval of the draft document. This announcement could be made through press releases or notifications on their website. Once SEBI approves the launch of the new fund offer (NFO) - Mirae Asset's Nifty EV & New Age Automotive ETF, it will be the sixth such opening in the year 2024 so far for Mirae Asset Mutual Fund.

While we wait for SEBI's decision, it's important to note that this might not be the only option for investors interested in the EV space. You may consider reading - Top 5 Mutual Funds with High Exposure to EV Revolution

Disclaimer: PersonalFN does not receive any monetary compensation from the fund house or scheme names stated in the article.

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MITALI DHOKE is a Research Analyst at PersonalFN. She is an MBA (Finance) and a post-graduate in commerce (M. Com). She focuses primarily on covering articles around mutual funds including NFOs, financial planning and fixed-income products. Mitali holds an overall experience of 4 years in the financial services industry.
She also actively contributes towards content creation for PersonalFN’s social media platforms in the endeavour to educate investors and enhance their financial knowledge.
 

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.