Kotak Nifty Smallcap 250 Index Fund launched: Key details you should know

Kotak Mahindra Asset Management Company (KMAMC) on Monday launched the Kotak Nifty Smallcap 250 Index Fund, designed to replicate and track the Nifty Smallcap 250 Index. The fund will be open for public subscription from January 6, 2025, to January 20, 2025.

 

The Nifty Smallcap 250 Index consists of 250 companies ranked 251st to 500th within the Nifty 500 Index, specifically measuring the performance of small market capitalization companies. To be considered for inclusion, companies must be part of the Nifty 500 Index but not part of the Nifty 100 Index or Nifty Midcap 150 Index.

 

This index provides investors with diversified exposure to the Smallcap segment, encompassing a wide range of sectors and themes. The current sector representation shows 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%.

 

 

Key Scheme Details:

• Name of the Scheme: Kotak Nifty Smallcap 250 Index Fund
• Category of Scheme: Others - Index Fund
• Type of Scheme: An open-ended scheme replicating/tracking the Nifty Smallcap 250 Index
• Investment Objective: To provide returns that correspond to the total returns of the securities represented by the underlying index, subject to tracking errors. However, there is no guarantee that the investment objective will be achieved.
• Benchmark: Nifty Smallcap 250 Index (Total Return Index)
• Minimum Amount for Application: Rs. 100/- and any amount thereafter
• Fund Managers: Mr. Devender Singhal, Mr. Satish Dondapati, and Mr. Abhishek Bisen

 

This product is suitable for investors who are seeking:

Long-term capital growth

Returns that correspond to the performance of the Nifty Smallcap 250 Index, subject to tracking error

 

"The Kotak Nifty Smallcap 250 Index Fund represents an important addition to our product lineup in the passive category, catering to investors’ interest in India's Smallcap space. Smallcaps signify key sectors of the economy, including Capital Goods, Finance, Healthcare, and Consumption. While individual Smallcap stocks may exhibit varying performance, this index-based approach allows investors to potentially benefit from the overall growth of small-sized companies,"said Devender Singhal, Executive Vice President & Fund Manager at Kotak Mahindra AMC.

 

"The Nifty Smallcap 250 Index will give investors exposure to a broad set of Smallcap companies across various sectors. However, considering the stretched valuations, one should consider investing with long term view only," said Nilesh Shah, MD of Kotak AMC. 

 

Where Will the Scheme Invest?

The Kotak Nifty Smallcap 250 Index Fund will invest in a variety of securities, primarily focusing on the stocks that constitute the Nifty Smallcap 250 Index. The investment strategy is designed to mirror the index’s composition, ensuring a passive investment approach that aims to reduce tracking errors. Key components of the investment strategy include:

 

Equity Investments: The net assets will primarily be invested in stocks constituting the Nifty Smallcap 250 Index in approximately the same weightage as represented in the index, and may also include derivatives such as futures and options.

 

Government Securities: The fund may invest in securities issued by the Central and State Governments, including various types of government bonds and treasury bills.

 

Corporate Debt: The scheme may include corporate debt obligations, non-convertible debentures, and other debt instruments with varying maturity periods.

 

Mutual Fund Units: The fund may also invest in units of other mutual fund schemes.

 

Cash and Money Market Instruments: A small portion of the net assets may be held as cash or invested in money market instruments and short-term deposits to meet liquidity requirements. 

Investment Strategy

To achieve its investment objective, the Kotak Nifty Smallcap 250 Index Fund will follow a passive investment strategy. The fund will regularly rebalance its portfolio to align with any changes in the index's weights, thus minimizing tracking error. The passive nature of the fund implies a lesser risk compared to actively managed funds, but investors should be aware of the inherent risks associated with derivatives, which can amplify both gains and losses. 

Disclosure: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt Ltd