With India’s travel and tourism industry booming as more nationals travel domestically post-Covid, Mumbai-based Indian investment manager Tata Asset Management (Tata AM) has launched what it claims is the country’s first tourism index fund.

The Tata Nifty India Tourism Index Fund aims to harness this industry’s growth by targeting sectors like hotels and resorts, airlines, airports and airport services, restaurants, tour and travel-related services, and companies manufacturing travel-related products.

The fund captures the full spectrum of the travel and tourism sector, which, the asset manager points out, makes it favourable for long-term investors who believe in the potential of the Indian tourism sector.

The fund’s establishment, the asset manager shares, is based on six core long-term trends that it has been tracking:

• Increase in travel frequency: In 2023, the number of people taking three trips a year rose by 25% compared with 2019. Travel now includes short vacations, staycations, workcations and spiritual tourism.
• Growing middle-income group: The middle-income group, about 31% of India’s population, is expected to reach 47% by 2031, driving domestic travel growth, especially from tier-1 and -2 cities.
• Government infrastructure spending: Indian government initiatives like new air routes, tourist destination development, and investments in airport infrastructure are boosting tourism.
• Expansion of airline fleets: New airports and expanded airline fleets have made air travel more affordable, leading to a surge in air travel passengers.
• Evolving food industry trends: Urbanization and more women in the workforce are driving growth in quick-service restaurants, food processing companies and cloud kitchens. Urban consumers are dining out and ordering in more frequently.
• New destinations opening: Travellers are visiting unexplored destinations and searches for spiritual destinations have surged, with significant interest in cities like Lucknow and Bhubaneswar.

The fund, the asset manager says, could also appeal to individuals with a higher-risk appetite willing to invest in sector-specific funds and to investors seeking targeted exposure to the tourism segment without broad diversification.