DSP Mutual Fund has launched the DSP Nifty IT ETF, an open-ended ETF replicating the Nifty IT index. The ETF aims to benefit investors from the long-term growth of Indian IT companies, which have significantly contributed to India’s GDP and market share. The sector’s consistent growth and lower earnings variability have resulted in higher earnings multiples from investors.
The Indian IT sector offers global exposure to revenue flows and diversifies equity portfolios from domestic risks. Its financial strength is reflected in higher ROE and ROAs than global peers. However, the Nifty IT index has underperformed the Nifty 50 for 1.5 years, causing a turnaround in performance and declining IT sector weightage in the Nifty 50.
Anil Ghelani, CFA, Head – Passive Investments & Products, DSP Mutual Fund said, “We believe that at current levels, valuations are approaching average multiples, and many companies in this sector appear financially healthier and relatively cheaper when compared to global IT peers”.The Nifty IT index outperforms Nifty 50 on rolling returns, but investors should consider sector and stock level concentration risks, higher volatility, and short-term underperformance compared to diversified equity funds.