Will Navi’s index fund shake up the passive fund industry?

I had blogged about how Sachin Bansal of Flipkart has decided to improve state of financial services in India. His new venture is aptly named Navi meaning new.

The first fund offered by Navi Nifty 50, an index fund which tracks Nifty50 index. The fund was just launched recently and its new fund offer period got over and subscriptions will open on 19 July.

The USP of Navi Nifty50 is a Total Expense Ratio (TER) of 0.06% which is much lower than other index funds which charge in the range of 0.1% –  0.3%.  The lower TER means the savings go back to investors. So if there is another fund which generates identical returns as Navi Nifty50, one save Rs 1 lakh extra in Navi due to a lower TER for a 10 year investment.

Will Navi shakeup the highly passive ‘passive fund industry’ in India? This BS article says index funds likely to avoid price war. They deem lower TER as a marketing ploy and is financially unsustainable. Time will tell.

Interesting time to apply concepts of microeconomics to the mutual fund industry.