Here’s Why Nippon India Small Cap Fund Is Halting New Lump Sum Investments

Beginning today, July 7, 2023, Nippon India Mutual Fund has announced a temporary suspension of new lump sum contributions in its Nippon India Small Cap Fund.

After the effective date, “Fresh or additional subscriptions or switch-ins will not be allowed,” the fund house said.

Nippon India Mutual Fund will temporarily halt new lump sum investments in Nippon India Small Cap Fund due to the recent significant advance in the small-cap category and increasing investor involvement via big investments. According to the fund house, the choice would be in the best interests of current unitholders and would allow for more investment.

This limitation will not apply to current systematic investment plans (SIPs) or systematic transfer plans (STPs). The fund house also highlighted in a corrigendum that the restriction of Rs. 5 lakh per Permanent Account Number (PAN) each day would continue to apply to new registrations made via SIPs, STPs, or other special products.

“The limit on the subscription of units of the scheme is being proposed to facilitate the gradual deployment of the corpus in order to align with the nature of small-cap investing,” Nippon India Mutual Fund said in a statement.

Rise In The Small-Cap Sector

The small-cap rise has been highlighted by Nippon India Mutual Fund as the justification for stopping lump sum deposits in Nippon India Small Cap Fund.

Nine of the 23 small-cap mutual funds that generated returns of an average of 33.20 percent during the last year surpassed the category average. Five funds in total had returns of more than 40%. The category’s three-year average returns were a staggering 41.60%.

The previous one and three years have seen outstanding gains from small-cap mutual funds.

23 funds fall into this category, according to statistics from the Association of Mutual Funds in India (Amfi), with an average return of 33.20 percent for the 12-month period ending on July 4, 2023.

A rush of investors looking for prospective growth prospects have been drawn to this sector by the exceptional performance. One of the best performers in the category is the Nippon India Small Cap Fund, which had gains of 41.47 percent over the course of a year.

The decision by Nippon India comes after a similar one by Tata Mutual Fund, which stopped accepting lump sum contributions to its small-cap fund as of July 1, 2023.