Bandhan Mutual Fund launched the Bandhan Nifty Small-Cap 250 Index Fund today, a passive fund tracking the Nifty Small-Cap 250 Index, comprising stocks ranked 251-500 by market capitalisation.
The New Fund Offer (NFO) that opened today will close on December 19, 2023. Investors can invest using SIP starting at a minimum of Rs. 100, lump sum purchases from Rs. 1000, and additional purchases also in Rs 1,000 and then in multiples of Rs 1. There is no exit load involved in the scheme.
Vishal Kapoor, CEO, of Bandhan AMC said, “Poised to benefit from emerging themes across various sectors, small caps are well positioned to deliver outsized gains during bull markets. The 1-year annualized returns of the index stood at 32.8 per cent as of November 30, 2023, indicating strong performance, albeit higher volatility.”
According to Kapoor, the passive fund is suitable for investors seeking uncomplicated small-cap exposure at a lower cost, also because of the higher variability in active funds' returns.
The return variability is too much in active funds, where the best-performing fund gave 42 per cent and worst-performing fund gave 15 per cent.
But investors should also be mindful of the risk that a small-cap 250 Index is true to label, offering exposure to only small-cap stock, whereas active small-cap funds have the flexibility to adapt to changing market conditions. Also, note that small-caps are infamous for their volatility and tend to witness deeper and longer downside. However, investors who have a higher risk appetite can consider this fund.
The fund presents an opportunity to tap into potential multi-baggers and emerging businesses via passive investing, the fund house said. India churns out most multi-baggers, 70 per cent of which were small-caps, it claims.
The fund house underscores the upward potential of these stocks, citing that 30 small caps have grown to mid-caps in the last 4 years and one of them became a large cap stock.
AMFI data shows 4 other similar index funds, giving returns of around 37 per cent over one year and 32 per cent over three years. None of these funds are aged over 5 years.
