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Summary: India’s hottest mutual fund category just got a new challenger. Capitalmind, the maverick firm led by Deepak Shenoy, is launching a Flexi Cap fund driven entirely by algorithms, not star fund managers. Can this quant debut shake up an industry dominated by instincts and institutions?
When Deepak Shenoy began blogging about markets in the noughties, he courted geeks, not gurus. Now his Bangalore outfit, Capitalmind, is bringing that spreadsheet sobriety to small investors. On July 18th, it opened subscriptions for the Capitalmind Flexi Cap Fund, its debut scheme. Investors may chip in as little as Rs 5,000 and have until the closing bell on July 28th to do so.
Flexi-cap funds, which may wander freely across large-, mid- and small-cap shares, have become the toast of the industry. They pulled in more than Rs 30,000 crore of net inflows in the first half of 2025, the liveliest haul of any equity category. The largest of the lot, Parag Parikh’s flagship, recently smashed through the Rs 1 lakh crore mark, the first actively managed fund to do so. In a market where leadership rotates faster than a Twenty20 batting order, investors seem happy to outsource the timing decisions to mandates that can dart wherever momentum flickers.
Capitalmind’s selling point is that humans are the weakest link in that agility. Its portfolio will be chosen by algorithms that rank all 500 stocks in the benchmark index every fortnight on momentum, value, quality and volatility filters. When turbulence rises, the model can trim net equity exposure with index-futures hedges, while still respecting the Securities and Exchange Board of India’s rule that at least 65 per cent of the portfolio remains in shares. The aim, says Mr Shenoy, is to “compound steadily without guessing tomorrow’s headlines.”
Whether that promise survives contact with markets is another matter. Momentum works–until it doesn’t–as investors in another rules-based house, Quant Mutual Fund, discovered this year when its zeal for rapid turnover produced violent swings in returns. Critics also note that Capitalmind’s public track record is scant; its quant strategies have so far run only in private portfolios.
Price may help. The asset manager says its direct-plan expense ratio will sit “well below 1 per cent,” at the lower end of the regulator’s cap for the category. Distribution, though, is brutal. Forty rival flexi-cap schemes jostle for attention, many backed by giants with armies of bank branches.
Regulators are watching the quant craze with curiosity and caution. This month, SEBI floated rule changes that would, among other things, widen the types of assets equity funds can stash in their non-equity bucket. That comes against the backdrop of an industry that has swelled to nearly Rs 75 lakh crore in assets—more than double its size five years ago.
For Capitalmind, the real test starts once the subscription window shuts on July 28th and the algorithms confront live ammunition. Should the fund navigate the inevitable draw-downs without losing its nerve—or its investors’—it may force slower rivals to rethink their own dependence on gut instinct. In India’s increasingly data-driven markets, that would be no small feat.
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Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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