Thematic and sectoral funds are powerful investment instruments that require thoughtful consideration.Mutual Funds: Compared to more established sectors, the tourism industry is still relatively young and needs time to mature, despite its promise.
The Indian tourism industry is flourishing as a result of the government’s persistent focus on boosting connectivity and infrastructural development. Due to the significant growth that has resulted, tourism is now one of the industries in India that is expanding the fastest.
The increasing curiosity of Indians to discover their rich nation and develop a more profound sense of self is driving domestic tourism. Numerous factors contribute to the constant flow of people to far-off places across oceans and skies, which is very advantageous for the tourism industry. The industry’s potential as a significant business opportunity in the future is highlighted by the Tata Asset Management Company’s July 8, 2024, launch of the Tata Nifty India Tourism Index Fund.
On the website of the Ministry of Tourism, Government of India, for example, it states that in May 2024, there were 600,496 foreign tourist arrivals (FTAs), down 2.4% from May 2019 and up 0.3% from May 2023 and May 2023, respectively, to 598,480 in May 2023 and 615,136 in May 2019. FTAs totaled 40,72,329 from January to May 2024, up from 37,32,231 in January–May 2023 and 45,69,579 in January–May 2019. This indicates a decrease of 10.9% from 2019 and an increase of 9.1% from 2023.
This fund is an open-ended passive investment scheme that focuses on hospitality, travel, and tourism companies. This is the country’s first fund with a tourism focus. The aim of this scheme launch is to produce returns that, after deducting expenses, are in line with the performance of the Nifty India Tourism Index (TRI), while accounting for tracking errors. That said, there’s no assurance the scheme will meet its investment goal. There is no guarantee or promise of returns from the scheme.
What is the tourism index fund about?
The recently established fund offers diversification across several tourism-related subsectors, including lodging, travel services, entertainment, and necessities for travel. The objective of this approach is to reduce potential hazards and take advantage of expansion prospects in various sectors of the tourism industry.
The fund focuses on companies that are part of the Nifty 500 index in order to target larger, more established companies in the Indian tourism sector. This strategy seeks to provide stability as opposed to the possible volatility of a portfolio that is exclusively comprised of small-cap travel stocks. Restricting the weight of individual stocks in the index to a maximum of 20% avoids the overexposure to a single company, thus improving the fund’s diversification.
The tourism sector currently lacks saturation, and there may be additional companies from this sector that could be listed in the future.Mutual Funds Many modern investors see this as an opportune moment to invest in the sector. Importantly, investing in the entire index is often preferred when uncertain about individual stock selection, relieving investors from the pressure of predicting which specific companies will perform well.
To invest or to not invest?
Is it worthwhile to invest in the Tata Nifty India Tourism Index fund? When investors look into thematic sectors through new fund offerings (NFOs), they frequently ask themselves this question. In actuality, there isn’t a conclusive response. The maxim “to each, his own” directs how investors divide up their money in order to take advantage of opportunities in the market.
This offer is attractive because it is a direct investment in the rapidly expanding Indian tourism industry, with the possibility of large returns should the industry prosper. The fund spreads its investments over a number of subsectors, even though its primary focus is tourism, which lowers the industry’s risk.
Mutual Funds investment in more established, larger companies within the Nifty 500 index is a redeeming feature, as no other asset management company (AMC) is launching funds in this sector. Compared to smaller, more erratic businesses, this offers some stability. Although historical performance does not ensure future returns, it does indicate the sector’s inherent stability and a fund’s long-term performance in comparison to its peers and rivals.
Purchasing this mutual fund carries a higher risk than reward because it has no performance history and no industry-wide growth data to back it up. It is essential to carefully assess the potential of any stock market investment before making a decision. Determining the right amount to invest and knowing when, where, and how to divide your money in the market are equally crucial.
Purchasing a thematic fund requires thought and perseverance, especially if it hasn’t demonstrated performance in the past. Considering how slowly the industry is growing in comparison to other sectors, it’s wise to take some time to think things through before acting quickly.
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