The largest small-cap mutual fund scheme in India has adjusted its daily investment limits to Rs 50,000. See the details here
A decrease in the small-cap fund’s maximum investment restrictions has been announced by Nippon India Mutual Fund. New Systematic Investment Plans (SIPs) and Systematic Transfer Plans (STPs) are limited to Rs 50,000 each day per Permanent Account Number (PAN) under the new limitation, which goes into effect on Friday, March 22. The biggest small-cap plan in India is making this change in an effort to better manage its corpus in the face of market volatility.
This move comes soon after the first set of mutual fund stress test findings were made public, which revealed the fund needed to be rebalanced in light of shifting market conditions. The fund house has already stopped accepting lump sum contributions to the small-cap fund in July 2023. There was a daily limit of Rs 5 lakh per PAN for new registrations made via SIP or STP.
Nippon India Mutual Fund provided an explanation of the reasons for the increased subscription limitations, emphasizing the necessity for a phased deployment of the fund’s corpus to better match it with small-cap investment. Given the noteworthy upswing in the small-cap market sector and the heightened involvement of investors, these modifications are essential in order to preserve stability and efficiently manage risks.
It is not necessary for existing investors to be concerned about how these limitations would impact their STPs, SIPs, or other special products that were registered prior to the effective date. Similarly, the dividend reinvestment option’s unitholders won’t be impacted by these adjustments.
Alongside these changes, Nippon India Mutual Fund also announced alterations to the Nippon India Small Cap Fund’s exit load structure, which will take effect on March 22, 2024. One of the changes is that the departure load policy will now be “1% for redemption within 30 days” instead of the previous “1% for redemption within 1 year.” The purpose of this modification is to better manage investor expectations and bring the exit load policy into line with the fund’s investment objective.
These modifications have additional context thanks to insights gleaned from the stress test results. Nippon India Mutual Fund supplied the stress-test report. It states that the fund expects a liquidation timeline of up to 27 days to sell 50% of the small-cap fund’s holdings, and a shorter period of 13 days to sell 25% of assets. With the fund’s portfolio consisting of over 200 equities, these stress test findings are important information for both fund managers and investors.
The Association of Mutual Funds in India (AMFI) has directed that different fund institutions disclose the results of their stress tests, highlighting the industry’s adherence to regulatory norms. In addition to increasing investor confidence, this kind of openness guarantees that fund houses are equipped to handle difficult market situations.
Nippon India Mutual Fund has shown its dedication to responsible fund management and safeguarding investor interests by modifications to its exit load structure and investment restrictions. These kinds of steps become necessary for long-term stability and return maximization as the small-cap market keeps changing.
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