Tata BSE Quality Index Fund: A Smart Approach to Quality Investing

In sports, teams with well-rounded players tend to navigate different game situations efficiently. Similarly, in investing, companies with sound financials are often recognised for their ability to navigate different market conditions.

Presenting Tata BSE Quality Index Fund—an open-ended fund that tracks the BSE Quality Total Return Index (TRI). This fund invests in 30 companies selected based on high profitability, lower debt to equity, and high in earnings quality. The fund follows a factor-based approach to focus on businesses with strong financial characteristics.

Let’s explore how this fund works and what makes quality investing an approach worth considering.

What is Smart Beta & Quality Investing?

Smart Beta is an investment approach that combines passive investing with a factor-based strategy. Instead of selecting stocks based only on market cap (like traditional index funds), it selects companies based on specific characteristics such as alpha, value, momentum, quality, etc.

One such approach is Quality factor Investing, which focuses on financially stable companies rather than stock price movements. 

The BSE Quality Index, tracked by Tata BSE Quality Index Fund, selects companies based on quality scores using three key measures: 

• Return on Equity (ROE): How well a company uses its capital to generate profit.
• Accrual Ratio: How much of a company’s earnings come from actual cash flow rather than accounting adjustments.
• Financial Leverage: The amount of debt a company carries relative to self-owned funds (equity). Lower leverage means lower debt dependency.         
   

How Does Tata BSE Quality Index Fund Work?

The fund follows a factor-based method to select 30 companies from the universe of BSE 250 Large & Midcap Index.

Stock Selection Process

• Selecting the Universe: Companies are chosen from the BSE Large Midcap.
• Evaluating Financial Strength: Companies are ranked based on their quality scores using ROE, Accrual Ratio, and Financial Leverage.
• Final Selection: The top 30 companies with the highest quality scores are included in the index.         
   

Key Features of Tata BSE Quality Index Fund

• Invests in 30 high-quality companies
• Diversified across relatively defensive sectors such as FMCG, IT, Oil, Gas & Consumable Fuels, etc.
• Passively managed, tracking the BSE Quality TRI Index
• Uses a factor-based strategy
• Cost-efficient investment option

This fund provides exposure to businesses that have shown financial strength across different market conditions.

Why Consider Tata BSE Quality Index Fund?

1. Focus on Financially Sound Companies

   The fund invests in companies that:

   •    Use capital efficiently         
   •    Have earnings quality         
   •    Keep debt to equity levels low

2. Performance in Different Market Phases

   Historically, the quality factor has shown resilience in uncertain times, such as:

    •   Global Financial Crisis (2008-09)         
   •    COVID-19 Market Downturn (2020)         
   •    Ukraine War (2022)         
   
   While past performance does not indicate future results, businesses with strong financials have been observed to handle uncertainties more effectively. (Source: BSE, NSE)         
    

3. Factor-Based Passive Investing

   This fund follows a Factor based strategy, which combines the benefits of passive investing with factor-based stock selection. This method helps keep stock selection structured and data driven and free of biases.         
   Who May Consider Investing?

    •   Long-Term Investors – Those looking for consistent and sustainable growth.         
   •    Risk-Averse Investors –Suitable for those who want relatively lesser volatility and better downside protection.         
   •    Passive Investors – Suitable for investors who prefer index-based investing with a factor-based approach.         
    

Investing in quality companies can be a strategic way to navigate market uncertainties while aiming for long-term growth.         

Tata BSE Quality Index Fund offers an opportunity to invest in a portfolio of financially sound businesses, following a transparent, factor-based approach.         

Looking for a smarter way to invest in quality? Consider Tata BSE Quality Index Fund.         
 

Scheme Details     

Scheme Name

Tata BSE Quality Index Fund 

Scheme Category

Other Schemes - Index Fund

Scheme Type

An open-ended fund replicating / tracking the BSE Quality Total Return Index (TRI).

Min. Investment Amount

Minimum Application amount / Switch In: Rs 5,000/- and in multiple of Re.1/- thereafter

Load Structure:     
Entry Load

Not Applicable

Load Structure:     
Exit Load

0.25% of the applicable NAV, if redeemed on or before 15 days from the date of allotment.

This product is suitable for investors who are seeking*:

Scheme Risk-O-Meter

Benchmark Risk-O-Meter

• Long Term Capital Appreciation
• Returns that correspond to the total returns of the securities as represented by the BSE Quality Total Return Index, subject to tracking error.

*Investors should consult their financial advisors if in doubt about whether the product is suitable for them.

It may be noted that risk-o-meter specified above is based on internal assessment. The same shall be updated as per provision no. 17.4.1.i of SEBI Master Circular on Mutual Fund dated 27.06.2024, on Product labelling in mutual fund schemes on ongoing basis

*Mutual Fund investments are subject to market risks, read all scheme related documents carefully.