How to Invest in NIFTY IT Index via Zerodha? | Pros & Cons
NIFTY IT Index
In this article, we will discuss How to Invest in NIFTY IT Index via Zerodha? But getting into it let’s understand what does NIFTY IT Index means and what benefits you will derive from it?
The NIFTY IT Index is an equity index that represents the performance of the information technology (IT) sector of the National Stock Exchange (NSE) in India. Here are some key points about the NIFTY IT Index:
- The NIFTY IT Index comprises of 10 stocks of the IT sector listed on the NSE.
- The index is designed to provide investors with a benchmark to measure the performance of the IT sector of the Indian stock market.
- The index is calculated using the free-float market capitalization weighted methodology.
This means that the index is based on the total market value of the stocks in the index,
and the weightage of each stock is based on its free-float market capitalization.
- The NIFTY IT Index was launched on 6th June 1996, with a base value of 1000 points.
- The NIFTY IT Index is reviewed quarterly, and changes are made to the index constituents based
on various eligibility criteria such as market capitalization, liquidity, and other factors.
- The NIFTY IT Index is widely used by investors and traders as a benchmark for the performance of the IT sector, and as a basis for creating various investment products such as exchange-traded funds (ETFs), index funds, and other derivatives.
- Investing in the NIFTY IT Index via an ETF (exchange-traded fund) or mutual fund is a convenient way for investors to gain exposure to the IT sector of the Indian stock market.
Overall, the NIFTY IT Index provides investors with exposure to the IT sector of the Indian stock market, which is a key contributor to the growth of the Indian economy.
What are the Pros and Cons of Investing in the NIFTY IT Index?
Investing in the Nifty IT index can have several pros and cons. Here are some of them:
|Diversification:||The Nifty IT index provides exposure to a diversified basket of IT sector stocks, which can help to reduce the risk associated with investing in individual stocks.|
|Long-term growth potential:||The IT sector in India has shown strong growth potential over the past few decades, driven by factors such as digitalization, outsourcing, and the increasing adoption of technology by businesses and consumers. Investing in the Nifty IT index can provide exposure to this long-term growth potential.|
|Low-cost investment:||The Nifty IT index is a passive investment instrument, which means that the costs associated with managing the index are typically lower than actively managed funds. This can result in lower fees and expenses for investors.|
|Concentrated exposure:||The Nifty IT index tracks a limited number of IT sector stocks, which means that it provides concentrated exposure to this sector. This can lead to higher risk if the IT sector experiences a downturn or if any of the constituent companies face operational or financial issues.|
|Currency risk:||The performance of the IT sector in India can be impacted by factors such as currency fluctuations, geopolitical risks, and economic conditions. These factors can affect the returns earned by investors in the Nifty IT index.|
|Market volatility:||Like any other stock market index, the Nifty IT index is subject to market volatility and can experience sharp fluctuations in its value due to a variety of factors, such as changes in interest rates, geopolitical tensions, and global economic conditions.|
That is enough reason to want to invest in this index. However, unlike equities, you cannot purchase an index directly. Investing in the Nifty IT Index requires other methods. Here’s how to do it.
NIFTY IT Index via ETF and MF
Here are some key differences between ETFs and mutual funds in India:
- Trading mechanism:
ETFs are traded on the stock exchange like stocks, which means that their prices fluctuate throughout the trading day.
On the other hand, mutual funds are traded at the end of the day at the Net Asset Value (NAV) price.
ETFs are generally cheaper than mutual funds because they are passively managed and have lower expense ratios. Mutual funds, on the other hand, can be actively managed and have higher expense ratios.
- Investment minimums:
ETFs can be bought and sold in smaller quantities than mutual funds, which typically have higher minimum investment requirements.
Both ETFs and mutual funds offer diversification benefits, but ETFs may offer greater diversification because they track a specific index or sector.
ETFs are generally more tax-efficient than mutual funds because they are structured as exchange-traded securities.
ETFs are subject to capital gains tax only when they are sold, while mutual funds are subject to capital gains tax when the fund manager sells securities within the fund.
ETFs are generally more liquid than mutual funds because they can be bought and sold on the stock exchange throughout the trading day.
ETFs are more transparent than mutual funds because their holdings are disclosed on a daily basis, while mutual funds are required to disclose their holdings on a monthly basis.
There are several ETFs and mutual funds in India that track the NIFTY IT Index.
Some popular options include the Nippon India ETF Nifty IT, ICICI Prudential Technology Fund, and Aditya Birla Sun Life Digital India Fund.
Nippon India ETF Nifty IT
Nippon India ETF Nifty IT is an exchange-traded fund (ETF) that tracks the performance of the NIFTY IT Index. Here are some key points about the Nippon India ETF Nifty IT:
- The ETF is managed by Nippon Life India Asset Management Limited, which is one of the leading asset management companies in India.
- The ETF invests in the same stocks that are part of the NIFTY IT Index and aims to replicate the performance of the index.
- The Nippon India ETF Nifty IT is an open-ended ETF, which means that investors can buy and sell units of the ETF on the stock exchange like any other stock.
- The ETF is traded on the NSE of India, and investors can buy and sell units of the ETF through their broker.
- The Nippon India ETF Nifty IT is a passive investment vehicle, which means that the fund manager does not actively pick stocks or make investment decisions.
Instead, the fund simply tracks the performance of the NIFTY IT Index.
- By investing in the Nippon India ETF Nifty IT, investors can get exposure to the IT sector of the Indian stock market with the convenience of trading on the stock exchange.
Overall, the Nippon India ETF Nifty IT is a cost-effective and convenient way for investors to gain exposure to the IT sector of the Indian stock market.
However, like all investments, it carries risks, and investors should carefully consider their
investment objectives, risk tolerance, and investment horizon before investing in the ETF.
How to Invest in NIFTY IT Index via Zerodha?
You can invest in the Nifty IT Index via Zerodha by following these steps:
Time Needed : 03 minutes
Invest in the Nifty IT Index via Zerodha
- Open a Demat Account and Add Funds
Open a Demat Account with Zerodha:
If you haven't already done so, you'll need to open a Demat account with Zerodha to start investing. You can visit their website and follow the account opening process.
Add Funds to Your Zerodha Trading Account:
Once your Demat account is opened, you'll need to add funds to your Zerodha trading account to start investing. You can do this by logging in to your Zerodha account and selecting the "Add Funds" option. You can transfer funds using various payment modes such as Net Banking, UPI, etc.
- Login to Zerodha and Place an Order for Nifty IT Index:
After adding funds to your trading account, log in to your Zerodha account and search for the Nifty IT Index.
Before selecting a Nifty index fund, it is a good idea to do a comprehensive analysis on its performance and track record. Also, ensure that you read through the entire scheme-related documents.
- Select ITBEES NSE ETFs
To invest in NIFTY IT ETF, you can search for ITBEES' best-performing stock of Nippon India ETF Nifty IT matching the returns of NIFTY50.
Choose ITBEES from the one reflected in the dropdown indicating NSE one. Further select buy option.
- Enter your Buy Details
On the Buy screen, you can select the quantity of stocks to buy for ITBEES. In case you want to do daily trading then choose Intraday or else choose CNC for long-term investment. Moreover, select the quantity if want to buy at the current market rate then choose the Market radio button to execute the order immediately. On the other hand, choose Limit in case you want to buy at a certain price and then click on Buy Button.
- Go to Orders
Now the order is placed so go into the order section and check under pending order as you have chosen Limit. Once the price reaches 150 (example) then only this order will be executed or else remain in pending orders. At any point in time, if you wish to cancel this order you will have the cancel option.
The NIFTY IT index is an index of the NSE that represents the performance of the IT sector in India.
The index comprises 10 stocks of the IT sector listed on the NSE.
One way to invest in the NIFTY IT index is to buy an ETF that tracks the index.
Several fund houses in India offer NIFTY IT ETFs, such as ICICI Prudential IT ETF,
UTI Nifty IT ETF, and Reliance ETF Nifty IT.
Investing in the NIFTY IT index provides exposure to the IT sector, which has been one of the
fastest-growing sectors in India.
Additionally, since the NIFTY IT index comprises of 10 large-cap stocks, it provides
diversification benefits and helps to mitigate individual company-specific risk.
Investing in the NIFTY IT index carries market risks, including the potential loss of principal. Additionally, since the index is concentrated in the IT sector, any adverse developments
in the sector can affect the performance of the index.
Historically, the NIFTY IT index has delivered impressive returns, outperforming the broader market indices.
However, past performance does not guarantee future returns, and it is important to
conduct thorough research and analysis before making any investment decisions.