Kotak Small Cap Mutual Fund filed the much-needed documents with the Securities Exchange Board of India (SEBI) seeking permission to launch the Nifty Smallcap 50 Index Fund. The details in the documents filed on June 27, 2022, underscore the fund as a very risky investment option. Slated to be benchmarked against the Nifty Smallcap 50 Total Return Index, 95 per cent of this fund would be invested in small-cap stocks listed on the Nifty Smallcap 50 Index with the remaining five per cent being parked in debt and money market instruments.
The Nifty Smallcap 50 Index mainly invests in sectors including financial services, information technology, chemicals, telecommunications and consumer durables. The idea behind evaluating this index performance is to assess the movement of the small-cap segment of the stock market. The top holdings in this index are Central Depository Services India, KPIT Technologies, PVR, Computer Age Management Services and Multi Commodity Exchange of India.
Small-cap financial services constitute up to 34 per cent of the index with 17 per cent being represented by information technology companies. The remaining part of the index is limited to chemical sector stocks up to nine per cent, telecommunications shares up to six per cent with the smallest share being of consumer durables stocks up to five per cent. Since its inception, this index has managed to give returns exceeding nine per cent.
This is not the first fund house offering its investors the opportunity to invest in small-cap index funds. Before this, other asset management companies (AMCs) like the Aditya Birla Sun Life Mutual Fund and Axis Mutual Fund had launched their respective Nifty Smallcap 50 Index funds. At present, this mutual fund company is running many open-ended equity and debt index funds.
