The world of mutual funds is vast, and one of the more intriguing options available is the Groww Nifty EV and New Age Automotive Fund. This fund is particularly interesting due to its focus on electric vehicles (EV) and new-age automotive technologies. In this review, we will explore the Nifty EV Index, delve into the returns of the Nifty EV and New Age Automotive Fund, examine the stocks included in the Groww Nifty EV & New Age Automotive Fund, and look at the broader EV market trends and future potential. By the end, you’ll have a comprehensive understanding of this innovative investment opportunity.
Groww Nifty EV & New Age Automotive Fund ETF: A Ride into the Future
As of now, electric vehicles (EVs) constitute only 2% of the automotive market in India, compared to 9% in the US and Canada, 22% in Europe, and a staggering 37% in China. However, by 2030, India is projected to achieve a 30% market share in EVs. This means we will witness an EV revolution with an 8x growth across different EV segments over the next seven years.
Why the Future is Electric
The primary driver for the shift to electric vehicles is the rising cost of petrol. Over a car’s lifetime, it consumes about 3,000 liters of fuel, costing approximately ₹30 lakhs. In contrast, an EV consumes around 70 MW of electricity, which costs only ₹4.5 lakhs.
One of the major challenges for EVs is the battery replacement cost. However, the price of batteries is steadily declining. In 2019, the cost of a battery was $180 per kWh, but by 2024, it is expected to drop to $120 per kWh. For an EV with a 40 kWh capacity, such as the Tata Nexon, the battery replacement cost is around ₹4,00,000 plus GST and labor charges. By 2030, the price is projected to fall to $60 per kWh, reducing the cost to ₹2.88 lakhs plus GST and labor charges, making it 40% cheaper than today.
Global EV Growth Trends
Globally, EV adoption varies significantly. India, with its 2% market share, is still in the testing stage. In contrast, countries like Sweden and Norway are market leaders, followed by other European countries with heavy EV usage. By 2050, India aims to completely phase out internal combustion engine (ICE) vehicles, highlighting the country’s immense growth potential in the EV segment.
Challenges Facing EV Adoption
While the future looks promising, there are challenges that need to be addressed. The replacement cost for EVs is higher compared to ICE vehicles, as EVs require complete replacement of parts, whereas ICE vehicle parts can often be cleaned or repaired. This leads to higher insurance costs for EVs compared to their ICE counterparts.
Despite these challenges, the declining battery costs and increasing petrol prices make EVs a more viable and economical option in the long run. As India gears up for an EV revolution, the market dynamics are expected to shift significantly, paving the way for a greener and more sustainable future.
By addressing these challenges and capitalizing on the opportunities, India can achieve its ambitious EV targets, significantly reducing its carbon footprint and leading the charge towards a more sustainable future.
What is the Nifty EV Index?
The Nifty EV Index is a benchmark that tracks the performance of companies involved in the electric vehicle ecosystem in India. It encompasses a wide range of businesses, including EV manufacturers, battery producers, component suppliers, and charging infrastructure providers. The index serves as a barometer for the overall health of the EV sector in the country.
Analyzing Returns of Nifty EV and New Age Index vs. Nifty Midcap 150 TRI
1-Year Performance
The 1-Year Nifty EV and New Age index showed an average return of 26.28%, with a maximum return of 142.20% and a minimum return of -44.80%.
In comparison, the Nifty Midcap 150 TRI had an average return of 24.02%, a maximum of 115.80%, and a minimum of -34.20%.
The standard deviation for both indices was the same at 13.30%. This indicates that the Nifty EV and New Age index provided higher average returns, but with similar risk levels to the Nifty Midcap 150 TRI.
3-Year Performance
Over a 3-year period, the Nifty EV and New Age Automotive Fund index had an average return of 30.37%, with a maximum return of 53.60% and a minimum return of 1.50%.
The Nifty Midcap 150 TRI, on the other hand, had an average return of 24.89%, a maximum of 39.40%, and a minimum of 8.10%.
The standard deviation was slightly higher for the Nifty Midcap 150 TRI at 15.00% compared to 13.90% for the Nifty EV and New Age index.
The Nifty EV and New Age index outperformed the Nifty Midcap 150 TRI, demonstrating better returns with relatively lower risk. The chance of beating the market for the Nifty EV and New Age index over a 3-year period was 73.72%.
5-Year Performance
In the 5-year period, the Nifty EV and New Age Automotive Fund index had an average return of 22.36%, with a maximum return of 36.20% and a minimum return of 10.80%.
The Nifty Midcap 150 TRI had an average return of 20.57%, a maximum of 29.40%, and a minimum return of 10.80%.
The standard deviation was 23.30% for the Nifty EV and New Age index and 21.50% for the Nifty Midcap 150 TRI.
Although both indices had the same minimum return, the Nifty EV and New Age index achieved higher average and maximum returns, indicating better performance. The chance of beating the market for the Nifty EV and New Age index over a 5-year period was 70.64%.
Groww Nifty EV & New Age Automotive Stocks List
Conclusion
The Nifty EV and New Age index’s consistent outperformance over the Nifty Midcap 150 TRI shows its potential for delivering superior returns, even during market downturns. Though the Nifty Midcap 150 TRI has seen weaker short-term performance, it has achieved good returns with lower risk over five years.
Given their similar risk profiles and long-term returns, mutual fund investors already holding midcap index funds might avoid this fund. However, for others, the Nifty EV and New Age index is worth considering.