A Look at India’s First EV and New-Age Automotive ETF

By Surajit Roy

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Mirae Asset Investment Managers (India) has launched the country's first Exchange-Traded Fund (ETF) focused on the Electric Vehicle (EV) and new-age automotive segment. The Mirae Asset Nifty EV and New Age Automotive ETF aims to provide investors exposure to the rapidly evolving EV and automotive technology ecosystem in India.
Disclaimer: The information contained in this document is for educational and informational purposes only and should not be construed as investment advice. I am not registered with the Securities and Exchange Board of India (SEBI) as a financial advisor.  This is not a recommendation to buy or sell any security.  Before investing in any security, you should consult with a qualified financial advisor to determine if the investment is suitable for your investment objectives and risk tolerance.  Investing in the stock market is subject to market risks.

The Indian automotive industry is undergoing a seismic shift, fueled by the growing adoption of electric vehicles (EVs) and new-age technologies. To capitalize on this exciting opportunity, Mirae Asset Investment Managers (India) launched the country’s first Exchange-Traded Fund (ETF) dedicated to the EV and new-age automotive space – the Mirae Asset Nifty EV and New Age Automotive ETF. This article delves into the key features, investment rationale, and considerations for this innovative financial instrument.

Mirae Asset Nifty EV and New Age Automotive ETF

Mirae Asset Investment Managers (India) has launched the country's first Exchange-Traded Fund (ETF) focused on the Electric Vehicle (EV) and new-age automotive segment. The Mirae Asset Nifty EV and New Age Automotive ETF aims to provide investors exposure to the rapidly evolving EV and automotive technology ecosystem in India.

This open-ended ETF tracks the Nifty EV and New Age Automotive Total Return Index, a benchmark that reflects the performance of companies across the entire EV ecosystem in India. This comprehensive index encompasses:

  • Electric Vehicle Manufacturers: Companies at the forefront of designing and manufacturing electric two-wheelers, three-wheelers, passenger vehicles, and commercial vehicles.
  • Battery Makers: Firms engaged in the production and development of Lithium-ion batteries, a critical component for EVs.
  • Auto-Component Suppliers: Manufacturers of essential components specifically designed for electric vehicles, catering to the evolving needs of the industry.
  • Raw Material Providers: Companies supplying key raw materials like lithium, cobalt, and nickel, vital for battery production.
  • Technology Companies: Firms working on cutting-edge technologies like autonomous driving and connected car solutions, shaping the future of mobility.

By investing in this ETF, investors gain diversified exposure to these diverse segments, offering a holistic perspective on the EV and new-age automotive landscape in India.

Index Methodology

The Nifty EV and New Age Automotive Index tracks the performance of the companies which are active in the electric vehicles or new age automotive vehicle segment.

Universe:

Stocks forming part/going to form part of the Nifty 500 index.

Bottom 10 percentile stocks based on 6 month average daily turnover are ineligible for inclusion in the index.

Eligible Universe:

  1. Group A: Manufacturing of 2W/3W/4W/PV/CV Electric and New age automotive vehicles.
  2. Group B: Manufacturing of batteries for Electric and New age automotive vehicles.
  3. Group C.1: Manufacturing of components for Electric and New age automotive vehicles / Electric and New age automotive vehicles.
  4. Group C.2: Manufacturing/Supply of raw material for Electric and New age automotive vehicles/batteries/components.
  5. Group C.3: Provide advanced automotive technology for Electric and New age automotive vehicles.
  6. Group D: Part of the eligible universe of Group A, B or C and PLI for Advanced Automotive or ACC batteries or FAME or SMEV.

Stock Selection Criteria:

  1. Select all stocks forming part of Group A (Manufacturing of 2W/3W/4W/PV/CV Electric and New age automotive vehicles) and Group B (Manufacturing of batteries for Electric and New age automotive vehicles).
  2. Select the top 5 stocks based on 6-month average free-float market capitalization from each of Group C.1 (Manufacturing of components for Electric and New age automotive vehicles), Group C.2 (Manufacturing/Supply of raw material for Electric and New age automotive vehicles/batteries/components), and Group C.3 (Provide advanced automotive technology for Electric and New age automotive vehicles).
  3. Select the top 5 stocks based on 6-month average free-float market capitalization from Group D (Part of eligible universe of Group A, B or C and PLI for Advanced Automotive or ACC batteries or FAME or SMEV) that are not selected in any of the previous steps.

Index Rebalancing:

  1. The index shall be rebalanced on a quarterly basis in March, June, September, and December.
  2. The weight of each stock in the index is based on its free-float market capitalization.
  3. The aggregate weight of the stocks belonging to Group A (Automobile manufacturers) shall be capped at 40%.
  4. The weight of each stock belonging to Group A shall be capped at 8%, while all other stocks are capped at 4%.

Capturing the Potential of a Booming Industry

India’s EV market is poised for exponential growth, with a projected Compound Annual Growth Rate (CAGR) exceeding 40% from 2021 to 2027, reaching a staggering $150 billion by 2027. This surge is driven by several factors, including:

  • Government Initiatives: Supportive government policies like the Faster Adoption & Manufacturing of Hybrid and Electric Vehicles (FAME) scheme and Production Linked Incentive (PLI) schemes are actively promoting EV adoption and domestic manufacturing.
  • Rising Fuel Prices: The increasing cost of conventional fuels is incentivizing consumers to consider more economical and sustainable alternatives like electric vehicles.
  • Growing Environmental Concerns: A heightened awareness of environmental issues is driving the demand for cleaner transportation solutions, propelling the EV revolution.

The Mirae Asset Nifty EV and New Age Automotive ETF is strategically positioned to benefit from these tailwinds. While India might lack pure-play EV giants like BYD in China or Tesla in the US, the ETF cleverly captures the opportunity by investing in traditional automakers and suppliers actively transitioning towards EVs and new technologies. This diversified approach offers a well-rounded exposure to the burgeoning Indian EV market.

Portfolio of Mirae Asset Nifty EV and New Age Automotive ETF

Sl. No.Company NameBasic IndustryWeight
1Mahindra & MahindraPassenger Cars & Utility Vehicles9.6%
2Maruti Suzuki IndiaPassenger Cars & Utility Vehicles7.3%
3Bajaj Auto2/3 Wheelers7.1%
4Tata MotorsPassenger Cars & Utility Vehicles6.8%
5Exide IndustriesAuto Components & Equipments5.5%
6Samvardhana Motherson Intl.Auto Components & Equipments4.7%
7Schaeffler IndiaAuto Components & Equipments4.3%
8CG Power and Industrial SolutionsHeavy Electrical Equipment4.3%
9Amara Raja Energy & MobilityAuto Components & Equipments3.9%
10UNO MindaAuto Components & Equipments3.8%
11BoschAuto Components & Equipments3.7%
12KPIT TechnologiesComputers – Software Consulting3.6%
13Reliance IndustriesRefineries & Marketing3.5%
14Tata ChemicalsCommodity Chemicals3.4%
15Tata ElxsiComputers – Software Consulting3.4%
16Sona BLW Precision ForgingsAuto Components & Equipments3.4%
17L&T Technology ServicesIT Enabled Services3.0%
18Gujarat FluorochemicalsSpecialty Chemicals1.9%
19Motherson Sumi WiringAuto Components & Equipments2.8%
20Himadri Speciality ChemicalSpecialty Chemicals1.7%
21Hero MotoCorp2/3 Wheelers1.8%
22Eicher Motors2/3 Wheelers1.7%
23Tata TechnologiesIT Enabled Services1.7%
24TVS Motor Company2/3 Wheelers1.4%
25Bharat ForgeAuto Components & Equipments1.1%
26Tube Investments of IndiaAuto Components & Equipments1.0%
27Ashok LeylandCommercial Vehicles0.8%
28Minda CorporationAuto Components & Equipments0.8%
29Varroc EngineeringAuto Components & Equipments0.8%
30Olectra GreentechPassenger Cars & Utility Vehicles0.2%
31Jupiter WagonsRailway Wagons0.2%
32JBM AutoAuto Components & Equipments0.1%
33RattanIndia EnterprisesE-Retail/E-Commerce0.1%
Portfolio of Mirae Asset Nifty EV and New Age Automotive ETF

The Nifty EV and New Age Automotive Index aims to track the performance of companies that are active in the electric vehicles or new age automotive vehicles segment. The index includes a diverse set of companies across the EV value chain, including vehicle manufacturers, battery makers, auto-component suppliers, raw material providers, and technology companies.

The index has a total of 33 constituents, with the top holdings being Mahindra & Mahindra (9.6%), Maruti Suzuki India (7.3%), and Bajaj Auto (7.1%). The index is heavily weighted towards the automobile and auto components sector, which accounts for over 72% of the total weight.

Other notable companies in the index include Tata Motors, Exide Industries, Samvardhana Motherson International, Schaeffler India, CG Power and Industrial Solutions, and Amara Raja Energy & Mobility. The index also includes companies involved in specialty chemicals, IT services, and other new-age automotive technologies.

The index is rebalanced on a quarterly basis, and the weight of each stock is based on its free-float market capitalization. The aggregate weight of the stocks belonging to the automobile manufacturers’ group is capped at 40%, while the weight of each individual stock in this group is capped at 8%. All other stocks are capped at 4%.

Innovative Players Across Different Segments of the EV Ecosystem

The Nifty EV and New Age Automotive Index captures innovative players across the EV value chain, including vehicle manufacturers, battery makers, auto-component suppliers, raw material providers, and technology companies driving India's electric mobility revolution.

The Nifty EV and New Age Automotive Index includes a diverse set of companies that are at the forefront of the electric vehicle revolution in India. The index captures both established players and emerging innovators across the EV value chain, including vehicle manufacturers, battery makers, auto-component suppliers, raw material providers, and technology companies.

Some notable companies in the index include Tata Motors, which has a dominant 70% market share in the 4W passenger vehicle segment. Unlisted companies like Battery Smart, India’s largest EV battery-swapping network, and Revolt, the market leader in electric motorcycles, are also shaping the future of mobility. Other innovative players in the index are Olectra Greentech, the market leader in electric buses, Ola Electric, the leader in electric scooters, Ather Energy, known for its high-range electric scooters, and LTI Mindtree, a leading provider of ADAS systems to tier-1 OEMs.

The index also includes established players like Exide Industries, a market leader in battery manufacturing, and emerging platforms like Cygni Energy, an app-based provider of smart solar generators and EV batteries. These companies, along with others in the index, are driving the growth and adoption of electric vehicles in India through their cutting-edge technologies and innovative business models.

Investment Considerations and Access

The Mirae Asset Nifty EV and New Age Automotive ETF offers a convenient and cost-effective way for investors to participate in the growth of the Indian EV and new-age automotive sector. The minimum investment during the New Fund Offer (NFO) period is Rs 5,000, with subsequent investments possible in multiples of Re 1. The ETF will be listed on both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) within 5 business days of allotment.

However, it’s crucial to acknowledge that, like any thematic ETF, this instrument carries inherent risks. The EV sector is still evolving, and its performance might experience short-term volatility. Additionally, the ETF’s performance may diverge from the broader automotive sector’s growth in the short term. To mitigate these risks and maximize potential returns, investors should adopt a long-term investment horizon of at least 5 years.

Risk-Return Profile

The Mirae Asset Nifty EV and New Age Automotive ETF offers exposure to the rapidly evolving EV and new-age automotive ecosystem in India. As a thematic fund, it carries a very high level of risk, but the potential for long-term capital appreciation is also high for investors with a long-term horizon.

As a thematic fund, the Mirae Asset Nifty EV and New Age Automotive ETF may experience short-term volatility. The performance of the fund could diverge from the underlying sector’s growth in the near term, as it is focused on a specific theme within the broader automotive industry. Investors should have a long-term investment horizon of at least 5 years to fully benefit from the potential growth of the EV and new-age automotive industry in India. The rapid evolution of this sector and the fund’s exposure to emerging technologies and trends may lead to higher short-term fluctuations in the fund’s net asset value.

It is important for investors to understand that thematic funds like the Mirae Asset Nifty EV and New Age Automotive ETF carry a very high level of risk. The fund’s performance is closely tied to the growth and adoption of electric vehicles, autonomous driving, and other new automotive technologies in India. While the long-term prospects of this sector appear promising, investors should be prepared for potential periods of heightened volatility and be willing to hold the investment for an extended period to realize the full benefits.

Embracing the Future of Mobility

The launch of the Mirae Asset Nifty EV and New Age Automotive ETF marks a significant development for Indian investors seeking exposure to the burgeoning EV and new-age automotive landscape. This innovative instrument offers a diversified and convenient way to participate in the sector’s anticipated growth, driven by government initiatives, rising fuel prices, and increasing consumer demand for sustainable transportation solutions. However, before making an investment decision, conducting thorough research and understanding your risk tolerance is paramount. Consulting a financial advisor can be beneficial, especially for those unfamiliar with thematic ETFs.

The Indian EV sector presents a compelling investment opportunity, and the Mirae Asset Nifty EV and New Age Automotive ETF offers a unique avenue to capitalize on this potential. By providing exposure to a basket of companies across the entire EV value chain, this ETF allows investors to participate in the industry’s growth without the need for individual stock selection.

As India transitions towards a more sustainable future, the EV and new-age automotive sector is poised to play a pivotal role. The Mirae Asset Nifty EV and New Age Automotive ETF empowers investors to be a part of this exciting journey, potentially reaping the rewards of a transportation revolution in the making.

Surajit Roy

I'm a trade compliance specialist by profession, ensuring adherence to regulations. As a hobbyist author, I've published four non-fiction and one fiction novel. I indulge in writing book reviews, quotes, and articles on international business, leveraging my expertise to share valuable insights and information with others.

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