Edelweiss MF bets on India's digital boom with first-of-its-kind fund; should you get in?

This is an open-ended index fund replicating the BSE Internet Economy Total Return Index (TRI).

The index spans 11 sub-industries, including e-retail, internet and catalogue retail, e-learning, digital entertainment, financial technologies, telecom,  and other digitally driven sectors.

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The fund offers a pure-play exposure to India’s internet and digital economy — capturing digital platforms, marketplaces, digital infrastructure providers, and service enablers.

Unlike traditional tech funds that are heavily weighted towards information technology (IT) services and software companies, this fund will have exposure only to the top 20 digital and internet businesses. It excludes legacy tech, focussing instead on drivers of India's internet economy.

For starters, one needs to invest a minimum of Rs 100 in the fund, and multiples of Re 1 thereafter.

The scheme would be managed by Bhavesh Jain and Bharat Lahoti, Co-Head, Factor Investing, Edelweiss Mutual Fund.

How is the index constructed?

The BSE Internet Economy TRI comprises the top 20 companies selected from the BSE 500 based on their six-month average market capitalisation,  representing India's rapidly growing digital ecosystem.

Constituents are weighted by float-adjusted market capitalisation, subject to an individual stock weight cap of 15 percent.

Launched in October 2024, the BSE Internet Economy TRI is reconstituted semi-annually in June and December.

Top stocks in the index are Bharti Airtel (14.7 percent), Zomato (13.7 percent), Info Edge (12.3 percent), PB Fintech (11.6 percent), and Multi Commodity Exchange Of India (6  percent).

In terms of sectoral weightage, consumer discretionary has a weight of 39.49 percent, followed by financial services at 37.46 percent and telecommunications at 23.05 percent.

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While there may be overlaps with other funds, this fund stands apart by offering targeted exposure to digital-first businesses across multiple sectors — not just consumption or software.

“Existing funds often include traditional IT and software companies. This eliminates those and focuses solely on internet-driven growth areas like quick commerce, digital broking, e-ticketing, and fintech. It's about investing in the platforms, infrastructure providers, and enablers of the digital economy,” said Niranjan Avasthi, Senior Vice President and Head-Products, Marketing and Digital, at Edelweiss MF.

What works?

This fund excludes traditional IT giants (TCS, Infosys) entirely — allocating 100 percent to companies that are direct enablers or beneficiaries of the internet economy. It's best suited for long-term, growth-oriented investors who want to participate in India’s digital transformation story.

On all timelines, the BSE Internet Economy TRI has beaten indices such as the BSE 500 TRI, Nifty India Digital TRI, and BSE Teck TRI.

“With increasing adoption of the internet, the development of digital services, and the supportive demographic tailwinds of the younger population, India is witnessing a transformational shift in its digital economy. In this context, the Edelweiss BSE Internet Economy Index Fund is a welcome development for those seeking to directly invest in the country’s burgeoning internet ecosystem,” said Ajay Kumar Yadav, CEO and CIO, Wise Finserv.

What doesn’t work?

The fund’s theme is inherently volatile. For example, in 2022, the index fell 25.1 percent, underperforming the broader market. However, it also demonstrated strong recovery and outperformance in subsequent years

Further, the BSE Internet index closed at 2,802.48 on April 24, 2025, lower than its initial value of 2,900 when it was launched on October 10, 2024, representing a -3.36 percent return on investment.

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“This figure shows the short-term volatility associated with overarching business themes and expectations. Many digital-first companies tend to be valued highly from the outset. The current P/E of the index is 69.86 and the P/B is 8.61, indicating strong yet cautious sentiment towards these businesses,” said Yadav, who categorises the fund under the “Very High” risk profile.

What should investors do?

As with any high-growth theme, investment enthusiasm needs to be tempered with caution.

“This is a high-risk, high-reward play, best suited for investors with a long-term horizon (at least 5–7 years), high risk appetite, and strong conviction in India’s digital growth story. Retail investors should consider this fund as a satellite (thematic) allocation,” said Nikunj Saraf, Vice President, Choice Wealth.

According to Nilesh D Naik, Head, Investment Products, Share.Market (PhonePe Wealth), such funds are typically meant for seasoned investors who have their core portfolio in place and want to take an aggressive bet on a niche theme.

“Retail investors who are relatively new to mutual funds will be better off sticking to diversified funds across core equity categories such as largecap, flexicap, midcap, value, or contra funds, etc,” said Naik.

Given its concentrated thematic exposure, this fund could be a satellite allocation in a diversified portfolio. Young investors, digital-savvy professionals, and those bullish on the next decade of India’s internet economy can consider this as a strategic bet on future leaders of the digital age.