Aditya Birla Sun Life Nifty Smallcap 50 Index Fund NFO – Should you invest?

Aditya Birla Sun Life Nifty Smallcap 50 Index Fund NFO - Should you investAditya Birla Sun Life Nifty Smallcap 50 Index Fund NFO – Should you invest?

Aditya Birla Sun Life has launched Nifty Smallcap 50 Index Fund that would open for subscription on 15th March, 2021. This fund would invest in the NIFTY Smallcap 50 index, which has 50 small cap companies. This index has delivered 10.5% annualized returns in the last 15 years. Should you invest in Aditya Birla Sun Life Nifty Smallcap 50 Index Fund NFO? What are the risk factors in this mutual fund?

Also Read: Best Smallcap Mutual Funds to invest

Aditya Birla Sun Life Nifty Smallcap 50 Index Fund – NFO Issue details

This is an open-ended index fund replicating / tracking Nifty Smallcap 50 index. Here are the NFO issue details.

Scheme Opens 15-Mar-21
Scheme Closes 26-Mar-21
Scheme reopens for continuous purchase/sale Within 5 days from date of allotment
Minimum Lumpsum Rs 500
Minimum SIP Rs 500 for 6 months
NAV of the fund Rs 10 during NFO period
Entry Load Nil
Exit Load < 90 days – 0.5%
> 90 days – Nil
Risk Very High
Max expense Ratio (TER) 1.00%
Benchmark Nifty Smallcap 50 TR Index

Download Aditya Birla Sun Life Nifty Smallcap 50 Index Fund SID

What is the investment objective of the Aditya Birla Sun Life Nifty Smallcap 50 Index Fund?

The investment objective of the scheme is to provide returns that closely correspond to the total returns of securities as represented by Nifty Smallcap 50 Index, subject to tracking errors.

There is no assurance or guarantee that the investment objective of the scheme will be realized.

What is the allocation pattern in this index fund?

Here is how the index fund would invest:

Type of instruments Min % Max % Risk Profile
Equity & Equity related securities constituting the Nifty
Smallcap 50 Index
95% 100% Medium to High
Debt and Money Market Instruments 0% 5% Low to Medium

What does Nifty Smallcap 50 Index Fund contain?

The primary objective of the NIFTY Smallcap 50 Index is to capture the movement of the smallcap segment of the market. The index represents top 50 companies selected based on average daily turnover from the top 100 companies selected based on full market capitalisation in NIFTY Smallcap 250 Index.

NIFTY Smallcap 50 Index is computed using free float market capitalization method, wherein the level of the index reflects the total free float market value of all the stocks in the index relative to particular base market capitalization value.

Here is the list and their weightage in this index by sector and top constituents as of now.

NIFTY Smallcap 50 Index - Sector wise

NIFTY Smallcap 50 Index - Top Constituents Mar-2021

Why to invest in Aditya Birla Sun Life Nifty Smallcap 50 Index Fund?

Here are a few reasons to invest in such index funds.

1) This fund replicates and invest in a NIFTY Smallcap 50 index. If you want to tap opportunities in a small cap segment, you can invest in such funds.

2) Smallcap stocks have the potential to turn to midcap companies in short to medium term. Hence, one can tap such opportunities by investing in such funds.

Some key risk factors you should consider before you invest in such funds

One should consider some of these risk factors / negative factors before investing.

1) This index fund invests in the Smallcap 50 Index, which is the relatively smaller size of 50 stocks only compared to Smallcap 250 Index which has the widest list of 250 small cap stocks.

2) In spite of being higher risk, this smallcap 50 index has delivered 10.5% annualized returns in the last 15 years. If you observe smallcap 250 index has delivered 14% annualized returns in the last 15 years. Hence, investors who are willing to invest in small cap index can go for smallcap 250 index instead of the smallcap 50 index.

3) This index invests in small cap stocks. Small cap stocks are high risk. It can erode your capital in the short term.

4) It might invest in derivatives too, which are considered as high risk.

5) It invests upto 5% in debt instruments. There is interest rate risk and risk of downgrade of corporate credit ratings.

6) Investors should read the SID / KIM / prospectus before investing in such mutual funds.

How is the Performance of Nifty Smallcap 50 Index Fund?

Now, let us look at the performance of the underlying index where this index fund is going to invest. Total returns include dividends, interest and rights received by the shareholders (if any).

NIFTY Smallcap 50 Index - Performance Table 2016-2021

Here is the performance chart of the NAV of this index since 2005.

NIFTY Smallcap 50 Index Performance Chart 2005-2021

Also Read: Best Aggressive Mutual Funds to invest in 2021

Should you invest in the Aditya Birla Sun Life Nifty Smallcap 50 Index Fund?

Aditya Birla Sun Life Nifty Small Cap 50 Index Fund invests in the Smallcap 50 Index which has 50 smallcap companies. Though this is high risk index, it delivered only 10.5% returns in the last 15 years and 13% annualized returns in the last 5 years. If an investor wants to consider small cap index, they can go to Smallcap 250 Index related funds that delivered better returns for the risks they are taking. One can avoid this fund as of now.

If you like this article, please share it on your Facebook or Twitter. This might be useful to your friends too.

Suresh KP

2 comments

  • Munish K. Singh

    suresh ji,

    Can we consider axis nifty 100 index fund direct growth for 10 yrs period with a sip
    of 10000/month.

    Please give your views.

    • Hello Munish, NIFTY50 + NIFTY Next 50 are good for long term investments. Since you are investing in direct fund for 10 years with SIP, it is definitely a good option

Leave a Reply

Your email address will not be published. Required fields are marked *