Kotak Mahindra AMC Launches Nifty Smallcap 250 Index Fund: A Diversified Investment Opportunity
Kotak Mahindra Asset Management Company has today announced the launch of the Kotak Nifty Smallcap 250 Index Fund, which is an open-ended scheme that would replicate and track the Nifty Smallcap 250 Index. The fund is open for subscription now from January 6, 2025, and will remain open till January 20, 2025.
About the Nifty Smallcap 250 Index
It comprises 250 companies ranked between 251st and 500th in the Nifty 500 Index, excluding the participants in the Nifty 100 and Nifty Midcap 150 Indices. As a benchmark for small-cap companies, it would provide diversified exposure across various sectors and themes for the investors.
The index shows a Price-to-Earnings (P/E) ratio of 34.11, a Price-to-Book (P/B) ratio of 4.13, and a dividend yield of 0.88%. It comprises companies from important sectors like Capital Goods, Finance, Healthcare, and Consumption, which are the backbone of the economy.
Fund Key Highlights
- Scheme Name: Kotak Nifty Smallcap 250 Index Fund
- Category: Index fund
- Type: An open-ended scheme replicating/tracking the Nifty Smallcap 250 Index
- Objective: The fund would seek to earn returns that approximate the total return of the Nifty Smallcap 250 Index while allowing for some tracking errors. There is no guarantee that this objective will be met.
- Benchmark: Nifty Smallcap 250 Index (Total Return Index)
- Minimum Investment: Rs.100 and any amount thereafter.
Suitability for Investors
It is a fund meant for investors seeking long-term capital growth by investing in securities represented by the Nifty Smallcap 250 Index. The scheme reduces the risks related to active fund management, hence adopting a passive investment approach. The investor must keep in mind a long-term perspective as small-cap valuations are currently stretched.
Investment Strategy and Allocation
The Kotak Nifty Smallcap 250 Index Fund will mainly invest in equities by holding stocks from the Nifty Smallcap 250 Index in similar proportions as in the index.
Key components of the strategy include:
1. Equity Investments: Invest the majority of assets in the stocks of the Nifty Smallcap 250 Index, which may also include derivatives such as futures and options.
2. Central and State Government Securities: Money bills and bonds issued by the Central and State Governments.
3. Corporate Debt: Non-convertible debentures and other debt instruments of various maturity periods.
4. Mutual Fund Units: Units of other mutual fund schemes.
5. Cash and money market instruments: Money markets offer high liquidity, so cash or cash-equivalent deposits are used for this purpose.
The fund will have a passive investment strategy. The composition of the index will be mirrored to avoid tracking errors. Portfolio rebalancing will be done periodically to ensure the fund is aligned with changes in the index weights.
Greater Investment Consequences
The Kotak Nifty Smallcap 250 Index Fund is launched to avail the growing investment interest in the small-cap space of India. The fund opens an avenue of investment in a diversified range of small-cap companies so that investors may benefit from this market segment. Though individual stocks in the small-cap space may fluctuate, this index-based method offers a diversified opportunity to benefit from the collective performance of small-sized companies.
Being an index fund that has a diversified portfolio and invests passively, the Kotak Nifty Smallcap 250 Index Fund can be a compelling investment for small-cap growth stories in India. The fund emphasizes long-term growth and minimizes the risks associated with active management to deliver returns consistent with the performance of the Nifty Smallcap 250 Index. Investors must evaluate their risk appetite and time horizon before joining this scheme.
