Bajaj Allianz (ETR:) Life Insurance has introduced the Bajaj Allianz Life Mid Cap Index Fund, designed to tap into the Nifty Midcap 150 Index’s high-growth potential. The new fund offer (NFO) period is set to wrap up on November 28, 2023. The fund aims to provide capital appreciation by investing in mid-cap equities, known for their role in wealth creation, particularly during bullish market conditions.
The index fund’s strategy ensures broad diversification by investing in a wide array of stocks from the Nifty Midcap 150 Index. This approach helps distribute risk across multiple sectors and companies. As an index fund, it offers transparency, allowing investors to easily track its portfolio and performance.
Sampath Reddy, Chief Investment Officer at Bajaj Allianz Life Insurance, highlighted the consistent outperformance of mid-cap indices over large-cap indices over time. As of September 2023, the Nifty Midcap 150 Index has returned a compound annual growth rate (CAGR) of 21.2% over ten years, compared to the Nifty 50 index’s CAGR of 13.1%.
Reddy underscored the importance of portfolio diversification and exposure to different market-cap segments based on investors’ risk profiles and investment horizons. However, Bajaj Allianz Life pointed out that mid-cap stocks carry higher market risk and volatility. Therefore, they are more suitable for investors with a higher risk tolerance.
The company also noted that mid-cap indices typically experience higher drawdowns during market downturns. Despite these risks, insurance companies across India continue to launch NFOs, aiming to capitalize on high-growth sectors and emerging market trends.
Vivek Jain, Head of Investments at Policybazaar.com, stressed the significance of insurance companies’ participation in NFOs. According to Jain, these NFOs align with emerging trends and offer additional benefits such as life cover and tax-saving benefits under Section 80C of the Income Tax Act.
Bajaj Allianz Life’s introduction of the Mid Cap Index Fund comes amidst India’s robust economic growth, which has positioned it as the world’s fifth-largest economy and one of the top-performing global markets.
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