Kotak Nifty Smallcap 250 Index Fund Launched: Key Details to Know

Kotak Mahindra Mutual Fund has launched the Kotak Nifty Smallcap 250 Index Fund. The fund is designed to track and replicate the performance of the Nifty Smallcap 250 Index. It will be open for public subscription from January 6, 2025, to January 20, 2025.

About the Nifty Smallcap 250 Index 

The Nifty Smallcap 250 Index includes 250 companies ranked 251st to 500th within the Nifty 500 Index, focusing on small market capitalisation companies. These companies must be part of the Nifty 500 Index but not in the Nifty 100 or Nifty Midcap 150 Index. The index covers a broad range of sectors and offers 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%.

Scheme Overview

• Scheme Name: Kotak Nifty Smallcap 250 Index Fund
• Scheme Category: Others – Index Fund
• Scheme Type: Open-ended scheme tracking the Nifty Smallcap 250 Index
• Investment Objective: The fund aims to provide returns in line with the total returns of the Nifty Smallcap 250 Index, subject to tracking errors. However, there is no guarantee of achieving this objective.
• Benchmark: Nifty Smallcap 250 Index (Total Return Index)
• Minimum Investment Amount: ₹100 and any amount thereafter
• Fund Managers: Mr Devender Singhal, Mr Satish Dondapati, Mr Abhishek Bisen

Who Should Invest? 

The fund is suitable for investors seeking:

• Long-term capital growth
• Returns matching the performance of the Nifty Smallcap 250 Index, subject to tracking errors

Key Sectors of Smallcap Companies 

Smallcap companies represent key sectors such as Capital Goods, Finance, Healthcare, and Consumption. While individual smallcap stocks may perform differently, this index-based approach allows investors to benefit from the overall growth of small companies, according to Devender Singhal, Executive Vice President & Fund Manager at Kotak Mahindra AMC.

Investment Strategy 

The fund will follow a passive investment strategy, closely replicating the Nifty Smallcap 250 Index. The investment strategy will include:

• Equity Investments: The net assets will be primarily invested in stocks constituting the Nifty Smallcap 250 Index, ensuring the fund mirrors the index’s weightage.
• Government Securities: The fund may invest in government-issued bonds and treasury bills.
• Corporate Debt: Investments may include corporate debt instruments like non-convertible debentures.
• Mutual Fund Units: The fund may invest in units of other mutual funds.
• Cash and Money Market Instruments: A small portion may be kept in cash or short-term investments for liquidity.

Risk and Returns 

While the passive approach reduces risk compared to actively managed funds, investors should be aware that derivatives may amplify both gains and losses. Nilesh Shah, MD of Kotak AMC, advises investors to consider the fund for long-term investment due to the stretched valuations in the smallcap sector.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.