Kotak Nifty Smallcap 250 Index Fund launched

Kotak Mahindra Asset Management Company (KMAMC) introduced the Kotak Nifty SmallCap 250 Index Fund on Monday. The fund’s objective is to mimic and track the Nifty SmallCap 250 Index. The fund will be open for subscription from January 6, 2025, to January 20, 2025.

The Nifty SmallCap 250 Index, which mainly evaluates the performance of small-cap enterprises, consists of 250 businesses ranked 251–500 in the Nifty 500 Index. To be included, companies must be part of the Nifty 500 Index but not part of the Nifty 100 Index or the Nifty MidCap 150 Index.

This index offers investors diversified exposure within the small-cap segment, which includes various sectors and themes. Price-to-Earnings (P/E) ratio 34.11, Price-to-Book (P/B) ratio 4.13, and dividend yield 0.88% are all part of the current sectoral representation.

Key Details of the Fund:
The Kotak Nifty SmallCap 250 Index Fund is the scheme name.
– Type: Open-ended Index Fund

– Investment Goal: To mimic or follow the Nifty SmallCap 250 Index’s performance, although with tracking error. The fund will attempt to provide returns that are in line with the total returns of the underlying index, though this cannot be guaranteed.
The Nifty SmallCap 250 Index (Total Return Index) is the index.

– Minimum Investment: ₹100 and any amount thereafter

– Fund Managers: Mr. Devendra Singhal, Mr. Satish Dondapati, and Mr. Abhishek Bisen

Who is this Fund Suitable For?
This product is suitable for investors looking for:
– Long-term investment opportunities with a focus on the small-cap segment.
– Variated exposure to small-cap firms in different industries.

Additional Information:
– SEBI (Securities and Exchange Board of India) has introduced new regulations to prevent the mis-selling of NFOs and has emphasized the importance of portfolio changes.

– Radhika Gupta, MD & CEO of Edelweiss Mutual Fund, highlighted that after a period of poor performance over the last three years, the focus is now on “quality” themed mutual fund proposals.

– Kotak AMC’s Nifty 200 Index Fund targets top companies in the Nifty 200, making it an interesting option for those considering their investment strategies.

Investment Areas:
The Kotak Nifty SmallCap 250 Index Fund will focus primarily on securities that are part of the Nifty SmallCap 250 Index. The investment strategy follows a passive investment approach, aiming to reduce tracking errors. Key components of the investment strategy include:

– Investing in Nifty SmallCap 250 Stocks: The fund will invest in stocks from the Nifty SmallCap 250 Index, mirroring the index’s weightage. It may also include derivatives like futures and options.

– Government Securities: The fund may invest in securities issued by central and state governments, such as government bonds and treasury bills.

– Corporate Debt: The scheme may include corporate debt obligations, non-convertible debentures, and other forms of debt with varying maturity periods.

– Debt Instruments: The fund may invest in units of other mutual fund schemes.

– Money Market Instruments and Cash: Some part of the fund’s net assets may be kept in cash or invested in short-term deposits and money market instruments to meet liquidity requirements.

Investment Strategy:
The Kotak Nifty SmallCap 250 Index Fund will follow a passive investment strategy, aiming to track the performance of the Nifty SmallCap 250 Index as closely as possible. The fund will periodically rebalance its portfolio in line with changes in the index weightings, minimizing tracking errors. Passive funds, compared to actively managed funds, are considered lower risk but investors should be aware of the inherent risks that can affect both profits and losses.

Statements from Fund Management:
– Devendra Singhal, Fund Manager at Kotak Mahindra AMC, mentioned that the fund represents a significant addition to the passive category, catering to the growing interest in India’s small-cap sector. It covers essential sectors of the economy like Capital Goods, Finance, Healthcare, and Consumption.

– Nilesh Shah, MD of Kotak AMC, advised that while small-cap stocks may exhibit varied performance, investors should consider a long-term investment approach due to the extended valuations.