The initial public offer closes on June 30. The fund will reopen for continuous sale and repurchase from October 1, 1998. While there no load on entry, the fund will charge an exit load not exceeding 3 per cent.

The rationale for an index fund is the belief in the efficient market theory. Index funds are favoured on the assumption that trying to beat the market averages over the long run is futile and investments in these funds will atleast keep up with the market.

Of course, it is based on the assumption thatSensex more or less represents the market.

Master Index Fund could be a simple and effective mean to get a diversified stock portfolio, low-cost fund management and one is assured of not being a laggard.

The compounding effect of cost can have a significant bearing on the fund's performance in the long-term. Moreover the fund provides an opportunity to invest in the BSE Sensex stocks for as little as Rs 5,000.

Index Funds have relevance in some markets but not all. The evidence is that the more mature the market, the more difficult it is to add value. As in a mature market the information received by fund managers is largely the same for everybody.

However, with an Index fund an investor has to forego the opportunity to beat the market; they poor performers especially in a prolonged bear market and some index funds may not necessarily mean diversification.

Thus, if an investor had invested in a Sensex tracker in May 1994, his investment would have not grown at all, four years down the line.