Once upon a time in Pune, there lived a young professional named Ananya. Ananya had a keen interest in India’s burgeoning tourism industry and wanted to capitalise on its growth through investments. However, she wasn’t sure how to proceed.
Exploring Investment Avenues
Ananya discovered that investing in sector-specific mutual funds was an effective way to gain exposure to particular industries. In July 2024, Tata Asset Management introduced the Tata Nifty India Tourism Index Fund, India’s first mutual fund dedicated to the tourism sector. This open-ended passive scheme aimed to replicate the performance of the Nifty India Tourism Index, encompassing companies involved in travel and tourism-related industries such as hotels, resorts, airlines, and travel services (Business Standard).
The Scope of India’s Tourism Sector
India’s tourism industry is a significant contributor to the economy, driven by diverse attractions, cultural heritage, and large-scale events such as the Kumbh Mela, which attracts millions of domestic and international tourists. Other major festivities like Diwali, Holi, and Durga Puja also significantly boost domestic tourism, leading to high hotel occupancy, higher airline bookings, and an increase in demand for local travel services. According to the Ministry of Tourism, India’s foreign tourist arrivals grew by 43.5% in 2023, highlighting its robust potential (Invest India).
Major players in the tourism industry such as MakeMyTrip, Easy Trip Planners, and The Leela Hotels have successfully entered the Indian stock market, capitalising on this growth trend. (Reuters)
India’s tourism sector has been experiencing significant growth, contributing substantially to the nation’s economy. In 2023, the country witnessed a 43.5% increase in foreign tourist arrivals, underscoring its appeal as a global destination (investindia.gov.in).
Major Players in the Industry
Several prominent tourism companies have successfully entered the Indian stock market:
- MakeMyTrip Limited: An online travel company offering a range of services including flight bookings, hotel reservations, and holiday packages. The company has demonstrated strong financial performance, with earnings growing by an average of 52% over the past three quarters. (Investor’s Business Daily)
- Easy Trip Planners: Known for its platform EaseMyTrip.com, the company provides airline, train, and bus tickets, along with hotel reservations. In a strategic move to diversify, Easy Trip Planners announced an investment of 2 billion rupees to manufacture electric buses in India, leading to a 14% rise in its shares. (reuters.com)
- Schloss Bangalore (The Leela Hotels): Operating 12 luxury hotels across India, the company filed for a $599 million IPO in 2024 to capitalise on the buoyant Indian stock market. The proceeds are intended to repay debt and fund expansion plans, including adding eight more hotels by 2028 (reuters.com).
Finding the Right Platform
To invest in this fund, Ananya turned to Kuvera, a user-friendly online investment platform offering direct mutual fund plans with zero commissions. She signed up on Kuvera’s website, completed her KYC (Know Your Customer) process, and linked her bank account to facilitate seamless transactions.
Investing in the Tourism Sector Fund
On Kuvera, Ananya navigated to the mutual funds section and searched for the Tata Nifty India Tourism Index Fund. She reviewed the fund’s details, including its investment objective, expense ratio, and underlying holdings. Confident in the potential of India’s tourism sector, Ananya decided to invest a portion of her savings into the fund through a Systematic Investment Plan (SIP), allowing her to contribute a fixed amount monthly.
Like Ananya, you may also explore tourism-specific funds on Kuvera. They are as follows:
| Scheme | 3 Yr Return | TER |
| Tata Nifty India Tourism Index Growth Direct Plan | NA | 0.34% |
| Kotak Nifty India Tourism Index Growth Direct Plan | NA | 0.33% |
Source: Kuvera, Jan 26, 2025
Benefits of Investing in Tourism Sector Funds
1. Exposure to a Growing Industry
India’s tourism sector is experiencing significant growth, driven by increased domestic travel, government initiatives, and improved infrastructure. For example: India’s tourism sector saw a 43.5% rise in foreign tourist arrivals in 2023, driven by cultural events and improved infrastructure. This growth indicates strong future potential.
2. Diversification
Such funds provide exposure to various sub-sectors within tourism, including hospitality, travel services, and leisure, helping to spread risk across different areas of the industry. For example: Investing in a tourism fund provides exposure to hotels (The Leela Hotels), travel services (MakeMyTrip), and transportation (Easy Trip Planners), thereby mitigating risks within the industry.
3. Professional Management
The fund is managed by experienced professionals who make informed decisions to optimise returns. For example: Tata Asset Management employs skilled professionals who analyse market trends and optimise portfolio allocations to maximise returns.
4. Convenient Investment Avenues
Platforms like Kuvera enable seamless investment processes with easy account setup and zero commission for direct plans.
Considerations Before Investing
While Ananya was optimistic, she also took into account several important factors:
1. Sectoral Risk
Sector-specific funds can be more volatile than diversified equity funds due to their concentrated exposure. Like, the COVID-19 pandemic severely impacted the tourism industry, leading to hotel closures and reduced travel demand, demonstrating the sector’s vulnerability.
2. Investment Horizon
She recognised that investing in thematic funds often requires a longer time horizon to ride out potential volatility and benefit from growth trends. Tourism is a cyclical industry, and investors may need to wait years to see significant returns, especially during economic downturns.
3. No Guaranteed Returns
Like other mutual funds, their returns are subject to market risks, and past performance does not guarantee future results. It is because, despite past performance, events such as geopolitical tensions or economic slowdowns negatively impact markets, making it crucial to have realistic expectations regarding returns.
4. Expense Ratio
She also reviewed the fund’s expense ratio to ensure that the costs associated with managing the fund were reasonable and aligned with her investment goals. As high expense ratios can eat into potential profits.
Wrapping Up
Ananya’s experience emphasises the benefits and challenges of investing in thematic mutual funds, particularly in India’s growing tourism sector. By investing in the Tata Nifty India Tourism Index Fund via Kuvera, she gained exposure to a thriving industry while enjoying diversification and professional fund management. However, she also carefully considered sectoral risks, the need for a long-term horizon, and expense ratios. Her approach underscores the importance of aligning investments with financial goals, conducting thorough research, and leveraging user-friendly platforms. The tourism sector’s potential is significant, but success requires strategic planning and awareness of inherent market risks.
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