ICICI Prudential Smallcap Index Fund NFO – Review

ICICI Prudential Smalcap Index Fund - NFO Details and ReviewICICI Prudential Smallcap Index Fund NFO – Review

ICICI Prudential Mutual Funds has launched Smallcap Index Fund NFO.  This New Fund Offer would open for subscription on 12th October, 2021. ICICI Pru Smallcap Index Fund invests in small cap companies that are part of NIFTY Small Cap 250 Index. Smallcap index has beaten all indices and provided superior returns in the medium to long term. Should you invest in the ICICI Prudential Smallcap Index Fund NFO? What are the risk factors one should consider before investing in such small cap funds?

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What is Nifty Smallcap 250 Index?

ICICI Smallcap Index Fund invests in Nifty Smallcap 250 Index, hence it is important to know about the details of this underlying index.

Nifty Smallcap 250 index consists of 250 companies that are ranked from 251-500 from NIFTY 500. This smallcap index intends to measure the performance of small market capitalisation companies.

ICICI Prudential Smallcap Index Fund – NFO Issue Details

This is an open-ended mutual fund. Here are the NFO issue details.

Scheme Opens 12-Oct-21
Scheme Closes 26-Oct-21
Scheme reopens for continuous purchase/sale Within 5 working days after closure
Minimum Lumpsum Rs 100
Minimum SIP Rs 100 for 6 months
NAV of the fund Rs 10 during NFO period
Entry Load Nil
Exit Load Nil
Risk Very High Risk
Benchmark Nifty Smallcap 250 TRI
Fund Manager Mr. Kayzad Eghlim and Mr. Nishit Patel
Max TER 1.00%

You can read ICICI Prudential Smallcap Index Fund NFO SID

What is the composition of this NIFTY Smallcap 250 Index Fund?

Let us see the composition of this index fund by sector and the top stocks which are part of this index.

ICICI Prudential Smalcap Index Fund NFO - Nifty Smallcap index composition

ICICI Prudential Smalcap Index Fund - Nifty smallcap 250 index composition

What is the investment objective of ICICI Prudential Smallcap Index Fund?

The objective of the scheme is to invest in companies whose securities are included in Nifty Smallcap 250 Index and subject to tracking errors, to endeavor to achieve the returns of the above index. This would be done by investing in stocks comprising the Nifty Smallcap 250 Index in the same weightage that they represent in Nifty Smallcap 250 Index.

However, there can be no assurance or guarantee that the investment objective of the Scheme will be achieved

What is the allocation pattern in this mutual fund scheme?

This fund investment pattern is as follows:

Type of instruments Min % Max % Risk Profile
Equity and Equity related securities of companies constituting the underlying index (NIFTY Smallcap 250 Index) 95% 100% Medium to High
Money Market instruments including TREPs and Units of debt schemes 0% 5% Low to Medium
Units of Debt ETFs 0% 5% Low to Medium

Can NRI invest in this MF scheme?

Yes, they can invest in this scheme. They can invest on repatriation or non repatriation basis. However, Resident of Canada, US persons and OCBs cannot invest in this scheme.

Why should you invest in ICICI Prudential Smallcap Index Fund NFO?

Here are a few reasons to invest in such schemes.

1) This fund would invest in small cap index that has 250 small cap companies (251-500 market capitalization based). Investing in index funds for the long term would help to grow money, instead of picking up a few companies from small cap segment.

2) Small cap funds have always been rewarding investors in the medium to long term. This index generated 16% annualized returns since inception.

3) While large cap stocks can provide stable returns, small cap stocks can be multibaggers if invested for medium to long term. Hence, investing in small cap funds would be the best bet.

Key risk factors to consider before investing in such funds

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

1) This fund would invest in small cap index, which contains 250 smallcap companies. Small cap funds are always considered as high risk. These are volatile in nature. Fund manager can face liquidity issues with some of the small cap stocks.

2) Unlike other small cap funds where fund manager would have an option to pick and choose funds, this small cap index fund would not have this option. Even if the fund manager does not like a particular stock or any stock under performing in the small cap index, they are forced to invest in these stocks as they are part of the small cap index.

3) Investors should not assume any guaranteed returns from these MF schemes. As an example, these funds have underperformed during 2016 to 2019. Investors need to have patience to get good returns.

4) Investors should read the NFO prospectus before investing in such mutual fund schemes.

How is the performance of Smallcap 250 Index?

Let me provide you the performance of this small cap index.

1 Year Returns – 88%

5-year annualized returns – 15%

Annualized returns since inception – 16%

Below chart depicts how the index has been performing in the last 15 years.

Performance chart of Nifty smallcap 250 index composition, ICICI Prudential Small Cap Index Fund NFO Re

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Should you invest in ICICI Prudential Smallcap Index Fund NFO?

This fund invests in Nifty Smallcap 250 index stocks. Index funds would offer less returns compared to active mutual funds (that invests in specific stocks). These Smallcap index funds invest in small cap stocks which can be highly volatile. Investors need to have patience and hold for medium to long term to get good returns. Historically such index generated 15% to 16% annualized returns in medium to long term. High risk investors can invest in such schemes. Moderate to low risk investors should stay away from such funds. Alternatively, one can pick, some of the best small cap mutual funds too.

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Suresh KP

One comment

  1. Thank you so much suresh… this is interesting and we do not have any other AMC to benchmark or compare.. however this is good start and progress in index funds..

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