Tata Nifty India Tourism Index Fund: should you invest?
This article discusses the NFO of the Tata Nifty India Tourism Index Fund which is the first fund tracking the Nifty Tourism Index.
Tata Nifty India Tourism Index Fund: should you invest?
Posted on 10 Jul 2024
Author: Sayan Sircar
13 mins read
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This article discusses the NFO of the Tata Nifty India Tourism Index Fund which is the first fund tracking the Nifty Tourism Index.
Disclaimer: Image(s) from the Tata Mutual fund website is used for representational purposes only.
This article is a part of our detailed article series on new fund offerings (NFOs) in India. Ensure you have read the other parts here:
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📚 Topics covered:
- What are the details of the Tata Nifty India Tourism Index Fund NFO?
- What is the Nifty Tourism Index?
- Why did NSE launch the Nifty Tourism Index?
- Which brands are in the Nifty Tourism Index?
- Which stocks are in the Nifty Tourism Index?
- How has the Nifty Tourism Index behaved in the past?
- How has the Nifty Tourism Index performed in terms of rolling returns and risk?
- Is it a good time to invest in the Nifty Tourism Index stocks?
- Who should invest in the Tata Nifty India Tourism Index Fund?
- Who should not invest in the Tata Nifty India Tourism Index Fund?
What are the details of the Tata Nifty India Tourism Index Fund NFO?
TATA Asset Management has launched an NFO for an index (passive) mutual fund tracking the Nifty Tourism Index in July 2024.
This fund is an index fund that passively tracks the Nifty Tourism Index. The Nifty Tourism Index is an index (like the SENSEX or Nifty 50) tracking the Tourism and Hospitality sectors in India.
The NFO period for this fund was from July 8 to July 19, 2024.
What is the Nifty Tourism Index?
As per the NSE website:
Nifty India Tourism Index aims to track the performance of stocks from the Nifty 500 Index which represent the travel and tourism theme
Nifty India Tourism Index aims to track the performance of stocks from the Nifty 500 Index which represent the travel and tourism theme
As per the index factsheet, the index details are as follows:
| Metric | Description |
|---|---|
| Methodology | Free float-Weighted |
| No. of Constituents | 17 |
| Launch Date | Jun 18, 2024 |
| Base Date | April 01, 2005 |
| Base Value | 1000 |
| Calculation Frequency | End of day |
| Index Rebalancing | Semi-Annually |
Why did NSE launch the Nifty Tourism Index?
| Year | NSE Indices |
|---|---|
| 2013 | 36 |
| 2014 | 38 |
| 2015 | 48 |
| 2016 | 57 |
| 2017 | 69 |
| 2018 | 76 |
| 2019 | 78 |
| 2020 | 77 |
| 2021 | 87 |
| 2022 | 94 |
| 2023 | 104 |
| 2024 | 107 |
NSE makes money by creating indices and licensing that data to AMCs to launch index funds, ETFs, and other mutual funds tracking the index. It is such a great business that the number of indices published by NSE has increased three times from Jan-2013 to Jan-2024.
NSE has launched this index for investors to take advantage of the post-COVID boom in travel, tourism, hospitality and restaurant businesses.
Which brands are in the Nifty Tourism Index?
If you look at the top 10 stocks in the Nifty Tourism Index, it is full of well-known travel and hospitality brands:
| Stock | Weightage % | Selected Brand(s) |
|---|---|---|
| InterGlobe Aviation Ltd. | 20.31 | Indigo |
| Indian Hotels Co. Ltd. | 19.26 | Taj |
| Indian Railway Catering And Tourism | 13.31 | IRCTC |
| GMR Airports Infrastructure Ltd. | 10.57 | DEL/HYD Airports |
| Jubilant Foodworks Ltd. | 9.54 | Dominos Pizza, Dunkin’ Donuts |
| EIH Ltd. | 4.04 | Oberoi, Trident |
| Lemon Tree Hotels Ltd. | 3.13 | Lemon Tree |
| Sapphire Foods India Ltd. | 3.01 | KFC, Pizza Hut, Taco Bell |
| Devyani International Ltd. | 2.90 | KFC, Pizza Hut, Taco Bell |
| Westlife Foodworld Ltd. | 2.49 | McDonald’s |
Warning: With 73% weightage to the Top 5 stocks and 88% weightage to the Top 10, this is not a diversified index. The performance impact of the Top 5, which are composed of well-known brands, will be the maximum.
Which stocks are in the Nifty Tourism Index?
As per the index factsheet, the stocks in Nifty Tourism Index are as follows
| Company Name | Industry | Symbol |
|---|---|---|
| BLS International Services Ltd. | Consumer Services | BLS |
| Chalet Hotels Ltd. | Consumer Services | CHALET |
| Devyani International Ltd. | Consumer Services | DEVYANI |
| EIH Ltd. | Consumer Services | EIHOTEL |
| Easy Trip Planners Ltd. | Consumer Services | EASEMYTRIP |
| GMR Airports Infrastructure Ltd. | Services | GMRINFRA |
| Indian Hotels Co. Ltd. | Consumer Services | INDHOTEL |
| Indian Railway Catering And Tourism Corp | Consumer Services | IRCTC |
| InterGlobe Aviation Ltd. | Services | INDIGO |
| Jubilant Foodworks Ltd. | Consumer Services | JUBLFOOD |
| Lemon Tree Hotels Ltd. | Consumer Services | LEMONTREE |
| Mahindra Holidays & Resorts India Ltd. | Consumer Services | MHRIL |
| Restaurant Brands Asia Ltd. | Consumer Services | RBA |
| Safari Industries (India) Ltd. | Consumer Durables | SAFARI |
| Sapphire Foods India Ltd. | Consumer Services | SAPPHIRE |
| V.I.P. Industries Ltd. | Consumer Durables | VIPIND |
| Westlife Foodworld Ltd. | Consumer Services | WESTLIFE |
The updated list is here: stocks.
How has the Nifty Tourism Index behaved in the past?
The Nifty Tourism Index was started with a base date of April 01, 2005 and a starting value of 1000. The performance chart below shows how this index has performed versus the broad market index Nifty 500 Total Return Index (total return = price changes plus reinvested dividends):
It is important to note the underperformance prior to 2021 vs. the Nifty 500. We will revisit this point in the rolling excess-return charts.
How has the Nifty Tourism Index performed in terms of rolling returns and risk?
These rolling charts work on a window basis. Each point on the chart is calculated using a 3-year SIP like this:
- Point 1: 1st Jan 2020 to 1st Jan 2023
- Point 2: 1st Feb 2020 to 1st Feb 2023
- and so on
Here, using the same rolling window concept, we have calculated the standard deviation of the monthly returns using 36 months:
The rolling risk chart shows the inherent higher-than-parent volatile nature of the Nifty Tourism Index.
The risk-adjusted returns chart shows that for most of its life, the return per unit risk has been worse vs. the Nifty 500:
An interesting observation from the rolling correlation (which measures how much the indices are similar to each other) chart:
It was expected, as the rolling correlation chart shows, that these stocks do not move in tandem with the broad Nifty 500 Index.
To understand how to use data to understand if this NFO is good or not:
Is it a good time to invest in the Nifty Tourism Index stocks?
We will show these charts for excess returns of Nifty Tourism Index over the Nifty 500 for both SIP and lump sum as well a chart on information ratio.
Related:
Why SEBI wants mutual fund investors to learn about information ratio?
These three charts shows the clear reason why this index and NFO have been launched now. After years of marked underperformance, the Tourism and related stocks are finally doing better than the index.
Who should invest in the Tata Nifty India Tourism Index Fund?
“Investors should remember that excitement and expenses are their enemies.” - Warren Buffett
The recent outperformance of the Nifty Tourism Index vs. the Nifty 500 can be an incentive for the AMC to launch such a fund. However, if you are looking to invest, you need to understand which concept is more appealing to you:
- momentum-based signal: since the Nifty Tourism Index is going up vs. the Nifty 500, it will go up further
- mean reversion signal: since what goes up also comes down, the outperformance of this index vs. the Nifty 500 is an indicator that the trend will reverse soon
An investor who ticks one or more of the boxes below might consider investing:
☑ A keen follower of the Tourism and related sector news and companies
☑ Willing to invest a substantial portion of the portfolio (say 5% or more) as a satellite portfolio: What is a core-satellite portfolio and when can you use it?
☑ Would understand the inherent risks of theme-based investing
☑ Has research-based conviction on the entry and exit points for this theme
☑ Understands that thematic funds have tendencies of a sudden reversal that can wipe out all gains
Who should not invest in the Tata Nifty India Tourism Index Fund?
An investor who ticks one or more of the boxes below should not invest:
☑ Interested in this theme now that the index (and funds) exist
☑ Attracted by the recent high returns of this theme
☑ Has not done due diligence beyond reading about this index and funds online
☑ Will be investing a very small amount or will start a small SIP. Both indicate a lack of conviction and lead to portfolio clutter: How to clean up your mutual fund portfolio?
☑ Disagrees with the Warren Buffett quotation above
Related Articles
- Bandhan Nifty Total Market Index Fund: should you invest?
- Motilal Oswal Nifty Defence Index Fund: should you invest?
- The NIFTY Defence Index has risen more than 6x in 6 years. Should you invest?
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