In conversation with Nitin Kabadi, Head-ETF Business, ICICI Prudential AMC

What are some of the salient features of ICICI Prudential FMCG ETF?

ICICI Prudential FMCG ETF shall invest in companies forming part of Nifty FMCG index. The ETF aims to generate returns by investing in top 15 FMCG companies sorted on the basis of market capitalisation. During the NFO, investors can invest Rs 1,000 or multiples thereof. Post NFO and on an ongoing basis, the units of the ETF shall be listed on stock exchanges for trading. 

In the last few quarters, FMCG has been lagging in performance compared to many sectors. What made you launch this ETF currently?

At ICICI Prudential Mutual Fund, investors already have access to a wide variety of sector/thematic ETFs. So, by launching FMCG ETF, we are expanding our ETF product basket. There are other ETFs, which are based on sectors such as banks, private banks, IT and healthcare to choose from. 

In terms of sectors, FMCG is the fourth-largest in the country. FMCG is an integral part of our everyday life as it fulfils our day-to-day needs. Over the last few quarters, the evolving pandemic had caused a dent in performance. However, as the country is emerging out of the grip of the pandemic, we have seen an uptick in FMCG names. Also, today, most of the FMCG companies have partnered with major e-commerce platforms and has been successful in making their products easily available at the customer’s doorstep. Food & beverages, as well as health & wellness, are two categories, which have seen remarkable growth as consumers are increasingly becoming more conscious about consumption & hygiene. 

There are some thematic funds with the same theme. Why should an investor go for ETF? 

Currently, all of the other offerings based on the FMCG sector are in the actively managed space. ICICI Prudential FMCG ETF is the first ETF to be launched on the said theme. When investing in the ETF form, an investor has the flexibility to buy and sell the investment on the stock exchanges just like transacting a stock. Apart from this, an investor gets access to all the benefits of investing through ETFs. 

   
How do you see liquidity and impact cost of buying & selling ETFs in India, in general? 

Presently, the major players in the ETF universe are pension funds, insurance companies, and high net worth individuals (HNIs). Over the past year, retail investors have been warming up to the concept of ETFs. As more and more investors become part of the ETF universe, the liquidity position is set to improve considerably. As of now, market liquidity (on the exchanges) is created by authorised participants/market makers and is monitored on a daily basis. 

What should be the investment horizon for an investor wishing to subscribe to the NFO and what type of goals he should assign to this investment? 

The ideal investment horizon for all equity-oriented funds should be at least three years and above. Investors may consider this ETF as a part of their portfolio for tactical allocation towards a particular sector.