Motilal Oswal Asset Management Company (MOAMC) has launched Motilal Oswal Nifty Microcap 250 Index Fund—a passive fund offering exposure to microcap stocks. The fund aims to allow investors to participate in the growth potential of microcap stocks. Motilal Oswal Nifty Microcap 250 Index Fund is an open-ended fund replicating/tracking the total returns of the Nifty Microcap 250 Index. The NFO period commences on June 15 and closes on June 29.
Navin Agarwal, MD & CEO of Motilal Oswal Asset Management Company, said, “Our latest Microcap-based index fund offering will further expand our wide range of passive funds. By launching the Motilal Oswal Nifty Microcap 250 Index Fund, we offer investors a natural extension of the Motilal Oswal Nifty 500 Index Fund, complementing our existing range of broad-based index funds.”
Here are six important things to know about Nifty Microcap 250 Index Fund:
1. The Nifty Microcap 250 Index is designed to measure the performance of the top 250 companies excluding those already present in the Nifty 500 constituents. The index is well-diversified, with its top 10 holdings accounting for only 11% as against 59% in the Nifty 50 Index. Further, it provides diversified exposure to sectors like Industrials, Consumer Discretionary, Commodities, and Healthcare that are usually underweight in broad-based market indices.
2. Over the last three years, the Nifty Microcap 250 Index has delivered 58% annually, according to the press release on ‘Motilal Oswal AMC launches Motilal Oswal Nifty Microcap 250 Index Fund. While microcaps exhibit strong performance potential, they may also experience higher volatility and extended periods of underperformance to broad-based market indices.
3. Microcap companies comprising approximately 3% of the total market capitalization of listed stocks pose distinct characteristics that make them intriguing investment prospects.
4. Microcaps often fly under the radar of research analysts, with more than 40% of companies receiving no analyst coverage and only 12% of the stocks having more than five analyst coverage. Less than 4% of the mutual fund industry’s AUM is invested beyond the top 500 companies. This creates a higher likelihood of finding hidden opportunities, stated Motilal Oswal AMC press release. Moreover, various studies have indicated that small companies tend to outperform their larger counterparts due to illiquidity premiums, small company risk premiums etc. This makes investing in microcaps an attractive investment proposition.
5. The scheme’s investment objective is to provide returns that, before expenses, correspond to the total returns of the securities as represented by the Nifty Microcap 250 Index, subject to tracking error. However, there is no guarantee or assurance that the AMC will achieve the scheme’s investment objective. The Indicative Base Total Expense Ratio of the fund: Regular – 1.00%, Direct – 0.40%
6. The minimum application amount for Motilal Oswal Nifty Microcap 250 Index Fund is Rs 500 and in multiples of Re 1 after that. On an ongoing basis, investors can purchase/redeem scheme units through a financial advisor or by visiting the website.
Pratik Oswal, Head of Passive Funds, Motilal Oswal Asset Management Company, said, “Microcaps have a compelling track record of delivering higher returns compared to its counterparts, albeit at a higher risk. Investors are encouraged to consult their financial advisors; a prudent allocation of 5-10% to this fund may help enhance overall portfolio returns”.