Nippon India Launches Flexi Cap Fund – Review
Nippon India Mutual Fund has launched Flexi Cap Fund NFO. It’s an open-ended fund that invests across market capitalization of stocks i.e., large caps, mid-caps, and small caps. A single Flexicap fund itself can act like a diversified portfolio. Should you invest in Nippon India Flexi Cap Fund NFO? What are the risk factors an investor should consider before investing in such flexicap funds?
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Nippon India Flexi Cap Fund NFO Issue Details
Nippon India Flexi Cap Fund new fund offer would open for subscription on Monday, 26th July 2021 and closes on Monday, 9th August 2021. This is an open-ended mutual fund scheme. Here are the NFO issue details.
|Scheme reopens for continuous purchase/sale||24-Aug-21|
|Minimum Lumpsum||Rs 500|
|Minimum SIP||Rs 1,000 for 6 months|
|NAV of the fund||Rs 10 during NFO period|
|Exit Load||1% if > 10% of units redeemed within 1 year|
|Risk||Very High Risk|
|Benchmark||NIFTY 500 TRI|
Nippon India Flexi Cap Fund SID
What is the investment objective of Nippon India Flexi Cap Fund NFO?
The primary investment objective of the scheme is to seek to generate capital appreciation & provide long-term growth opportunities by investing in a portfolio constituted of equity securities & equity related securities and the secondary objective is to generate consistent returns by investing in debt and money market securities.
However, there can be no assurance or guarantee that the investment objective of the scheme would be achieved.
What is the allocation pattern in this fund?
This fund investment pattern is as follows:
|Type of instruments||Min %||Max %||Risk Profile|
|Equity and Equity related Instruments||65%||100%||Medium to High|
|Debt & Money Market Instruments||0%||35%||Low to Medium|
Why to invest in the Nippon India Flexi Cap Fund?
Here are a few reasons to invest in this fund.
1) This Flexicap fund would invest in large cap, Midcap and small cap which can help investors for diversification.
2) With no limit on market cap, there is large universe of stocks for investment.
3) While investment in large cap would provide stable returns, investment in midcap and small cap funds would provide opportunity to invest in multibagger stocks that can generate high returns.
4) Historically we have observed that market cap outperformance tends to occur in phases. E.g., Large cap performed well in 2018-2020. You are seeing midcap and small cap stocks zooming in the last couple of quarters. Tomorrow we do not know which segment might perform well. Hence, flexicap funds have high potential to perform in all market cycles. Below representation helps you to understand better.
5) Flexicap segment has historically given high rolling returns. Below chart depicts 3 years daily rolling returns for the past 12 years.
Major risk factors you should consider before investing in such funds
One should consider some of these risk factors / negative factors before investing.
1) This scheme would also invest in small cap and midcap stocks. While such stocks can provide high returns in the long term, these are high risk. There is low liquidity for midcap and small cap stocks compared to large cap stocks.
2) This mutual fund would invest up to 35% in debt instruments which have turned to be riskier these days.
3) Since this is new fund, there is no past performance. One cannot guess how such fund would perform in the medium to long term.
4) Investors should read scheme information document (SID) for complete risk factors of the scheme.
Performance of existing Flexi Cap Funds
Here is the performance of existing Flexicap funds in India. This would give an idea to investors on how these funds have performed in medium to long term. These are annualized returns.
|Scheme Name||3 Yrs||5 Yrs||10 Yrs|
|Parag Parikh Flexi Cap Fund||22.6%||20.8%||–|
|IIFL Focused Equity Fund||23.3%||18.7%||–|
|PGIM India Flexi Cap Fund||22.8%||18.4%||–|
|Axis Focused 25 Fund||13.2%||17.3%||–|
|UTI Flexi Cap Fund||18.1%||17.2%||15.6%|
|DSP Flexi Cap Fund||18.6%||17.0%||14.1%|
|Canara Robeco Flexi Cap Fund||17.1%||17.0%||13.9%|
|HDFC Retirement Savings (Equity)||18.3%||16.8%||–|
|SBI Focused Equity Fund||17.3%||16.2%||16.6%|
|Principal Focused Multicap Fund||17.4%||15.5%||13.5%|
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Should you invest in Nippon India Flexi Cap Fund?
Nippon India Flexi Cap Fund invests across market capitalization i.e., in large cap, midcap and small cap stocks. Such funds can act like diversification to investors, as they invest in stocks across market capitalizations. However, these funds would tend to perform better if invested in medium to long term. High risk investors can invest in this scheme from medium to long term perspective. If you don’t want to test with such new funds, you can opt for existing flex-cap mutual funds that have a proven track record.
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Hence this is NFO, after 5 yrs what will be the NAV of this fund?
No one can tell you what would be NAV after 5 years. This would depend on the fund performance.
Just a thought, if we investment in lumpsum in this nfo, say 100,000 rs. We will get 10000 units @ 10 nav. Once the nav increases say after 1 or 2 years. We can redeem. Is that a good idea? Your thoughts please..
Good idea. But don’t assume you can get good returns in 1 or 2 years