Decoding the EV ecosystem, stocks, sectors: Nifty EV and New Age Automotive ETF

Mirae Asset Mutual Fund has launched the Mirae Asset Nifty EV and New Age Automotive ETF (MNEV), a passively managed exchange traded fund (ETF) that tracks the Nifty EV New Age Automotive Index. This index tracks the performance of companies active in the electric vehicle (EV) or new-age automotive vehicle segment. It’s a niche, thematic fund that aims to invest in disruptive companies in the automobile segment. Swarup Anand Mohanty, Vice Chairman and CEO, Mirae Asset Investment Managers, says, "This is the future of mobility. We aim to provide avenues for long-term capital appreciation while supporting sustainable development in the automotive sector.”

The ETF is likely to cover the entire EV ecosystem
The MNEV ETF tries to provide diversified exposure to the emerging Indian mobility space, capturing not only current disruptions like EVs, hybrid vehicles, and batteries, but also possibly future disruptions like hydrogen fuel cell and autonomous vehicles.
Recent years have seen a dramatic shift in the Indian automobile sector, with increasing emphasis on environmentally friendly and sustainable mobility options. Proactive measures from the government, such as the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme, and production linked incentives (PLI) are likely to create a strong EV ecosystem in India.
An autocarpro.in report indicates that this launch comes at a time when the Indian automotive industry is poised for significant growth, driven by increasing consumer demand, government support, and technological advancement. Per industry reports, the Indian EV market is expected to grow at a CAGR of over 40 percent between 2021 to 2027, reaching a market size of over $150 billion by 2027.

The theme is diversified within the auto and related segments
The Nifty EV New Age Automotive Index chooses 33 stocks from the Nifty 500 index, which must be involved in the production and supply of electric or new-age automotive vehicles, batteries, components, raw materials, and technology. The total weight of stocks of electric two, three, and four-wheeler, and passenger and commercial vehicle (including new-age vehicle) manufacturers is capped at 40 percent. It has a flexicap mandate of holding assets across market capitalisations.

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Nifty Auto vs Nifty Transport & Logistics vs Nifty EV New Age Automotive Index
Currently, 10 mutual fund schemes, both actively and passively managed, invest predominantly in auto and related sectors. The three indices they follow are the Nifty Auto, Nifty EV New Age Automotive, and Nifty Transport & Logistics.
Explaining the difference in the investment nature of these indices, Siddharth Srivastava, Head, ETF Products, Mirae Asset Investment Managers, says, “The Nifty Auto Index Covers only auto and auto ancillary companies, while the Nifty EV New Age Automotive Index also covers companies across sectors which are involved in the EV and other new-age automotive value chain, like chemical companies, IT companies, etc.” The Nifty Transport & Logistics index, on the other hand, allocates to auto and auto ancillary companies, as well as services and capital goods firms.
Nifty Auto is a sectoral index with a largecap mandate, and has 15 companies, with the biggest stock having a weight of 21.8 percent. The Nifty EV New Age Automotive index is a thematic index with a flexicap approach, and includes 33 companies, with the biggest stock having a weight of 9.7 percent, Srivastava explains.

How have indices tracking the auto and related sectors fared?
Among the three indices, the Nifty EV New Age Automotive index has managed to outperform Nifty Auto and Nifty Transport & Logistics over the last six years.
The government’s decarbonisation agenda and reforms have led to a rise in EV sales. Rising EV penetration has caused the order books of auto ancillary firms to grow manifold. However, Deepak Jasani, Head, Retail Research, HDFC Securities, says that, “While the thrust on EV sales continues in India, the changes in subsidy payouts have hindered progress.” Falling battery costs can revive the growth in EV sales.
Per a paper by Niti Aayog and the Rocky Mountain Institute, if FAME II and other measures are successful, India could realise EV penetration of 30 percent of private cars, 70 percent of commercial cars, 40 percent of buses, and 80 percent of two and three-wheelers by 2030, Jasani says. He explains that while the outlook for EV sales seems bright, India may adopt a multi-pronged approach to decarbonisation, including hybrids, LNG, etc.
Below are the smallcap constituents of the Nifty EV New Age Automotive index. Source: Niftyindices.com and ACEMF.

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Amara Raja Energy & Mobility
Sub-sector: Batteries
M-Cap (BSE Full): Rs 25,245 crore
Total no. of active equity schemes holding the stock: 16

Himadri Speciality Chemical
Sub-sector: Chemicals
M-Cap (BSE Full): Rs 19,334 crore
Total no. of active equity schemes holding the stock: 4

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JBM Auto
Sub-sector: Auto Ancillary
M-Cap (BSE Full): Rs 24,424 crore
Total no. of active equity schemes holding the stock: NIL

Jupiter Wagons
Sub-sector: Railways Wagons
M-Cap (BSE Full): Rs 28,036 crore
Total no. of active equity schemes holding the stock: 13

Minda Corporation
Sub-sector: Auto Ancillary
M-Cap (BSE Full): Rs 11,811 crore
Total no. of active equity schemes holding the stock: 26

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Olectra Greentech
Sub-sector: Automobiles-Trucks/Lcv
M-Cap (BSE Full): Rs 14,273 crore
Total no. of active equity schemes holding the stock: NIL

RattanIndia Enterprises
Sub-sector: Professional Services
M-Cap (BSE Full): Rs 11,744 crore
Total no. of active equity schemes holding the stock: NIL

Varroc Engineering
Sub-sector: Auto Ancillary
M-Cap (BSE Full): Rs 10,337 crore
Total no. of active equity schemes holding the stock: 15

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