TATA Asset Management launches India's first ever tourism thematic fund

Travel, tourism, and hospitality businesses will do well in India in the coming years, according to you? But you do not know which stocks to pick from this space? Until now, it was tough, but it will no longer be. Tata Asset Management, which is India’s 11th biggest Asset Management Company (AMC), has recently launched India's first domestic fund focused on the tourism theme.

About TATA Asset Management

Tata Asset Management Company is a part of the Tata Group. They are a prominent player in the Indian mutual fund industry. The AMC was established in 1997 and offers a diverse range of mutual fund schemes catering to various investment goals and risk appetites. These schemes encompass equity, debt, hybrid funds, and solution-oriented funds that target specific financial needs like retirement planning or child education.

Tata AMC is known for its focus on investment research, risk management, and a long-term investment philosophy. They emphasize a strong research team that analyzes companies and market trends to guide their investment decisions within the chosen funds. Additionally, Tata AMC prioritizes risk management strategies to mitigate potential losses within their funds. Their focus on long-term wealth creation resonates with investors seeking a sustainable approach to growing their capital.

Types of themes launched by TATA AMC

The AMC has different thematic funds, and in this section, we will look at them to let you know there are other thematic funds available with the same AMC. Here is the list:

TATA's Tourism Themed Fund

Tata Nifty India Tourism Index Fund opened for subscription on 8 July 2024 and will stay open for investor subscription until 19 July 2024. Let us look at the fund details.

The maximum number of stocks in the fund is capped at 30. As of 18 June 2024, the fund had 17 stocks, with the highest allocation towards Indian Hotels (20.73%).

The complete breakdown of stocks in the fund is as below:

In line with the investment allocation pattern of the scheme, the scheme will invest in:

• Equity and equity-related instruments and/ or equity derivatives
• Debt and money market instruments
• Units of Domestic Mutual Funds

Investment Strategy of the Fund

The Fund is a passively managed Index fund that will employ an investment approach designed to track the performance of the Nifty India Tourism Index (TRI). The Scheme seeks to achieve this goal by investing in securities constituting the Index in the same proportion as in the Index. The Scheme will invest at least 95% of its total assets in the securities comprising the Underlying Index. The scheme may also invest in debt/money market instruments, including units of Mutual Funds to meet the liquidity and expense requirements.

Risks Associated with the Fund

Here are some of the risks associated with the fund:

• Regulatory and Legal Risks: Hotels, Resorts, Restaurant space, Airplanes, etc. investments are subject to various regulations and zoning laws. Changes in regulations, zoning restrictions, or legal disputes can affect the development potential and value of the assets.
• Market Saturation & Competition Risk: Investing in a market that is already saturated with similar types of leisure services can limit the potential for income or capital appreciation. i. Environmental and Natural Disaster Risks: Tourism-related assets & services are exposed to environmental risks, such as pollution or contamination. Additionally, Hotels, Resorts, Restaurant space, Airplanes, etc. in certain geographic areas may be prone to natural disasters like floods, earthquakes, or hurricanes, which can cause significant damage.
• Technological Disruption: Changes in technology (rise of free home delivery and accessibility of virtual 360-degree tours of any location from any remote area) could help people save both time & cost. I can impact the demand for certain types of assets like Fine Dine-In Hotels & Restaurants, traveling to various destinations, exploring exotic locations, mode of traveling like flights, etc.

Should you invest?

Hopefully, the information shared will help you make that call. However, before leaving, we would say that first evaluate if you should invest in equity (ideal for the long term) and risk on the thematic fund. Tourism is one of the fastest-growing sectors in India. However, due to the risky nature of sectoral/thematic funds, only experienced investors with high-risk appetites should consider this.

Also, you should only consider this if you are optimistic about the long-term prospects of the Indian tourism industry. If so, this fund could be a good way to gain exposure to a basket of companies in this sector.

Before you go

The launch of a tourism-themed fund signifies a growing interest in thematic investing in India. If you seek exposure to the tourism sector's potential growth, you should carefully research the fund, understand its risk tolerance, and potentially consult a financial advisor before investing.