NFO: Axis Mutual Fund launches Axis Nifty Smallcap 50 Index Fund | Value Research Axis Nifty Smallcap 50 Index Fund is a new index fund launched by Axis Mutual Fund in the small-cap segment. Read to know about the details of the new fund offer, performance, AMC and more.
NFO Review

NFO review: Axis Nifty Smallcap 50 Index Fund

Axis Mutual Fund launches an index fund tracking the Nifty Smallcap 50 TRI. Here are the details.

Axis Mutual Fund has launched a new index fund, Axis Nifty Smallcap 50 Index Fund, in the small-cap space that will track the Nifty Smallcap 50 TRI. The new fund offer (NFO) is open for subscription from February 21 to March 07, 2022. Axis Nifty Smallcap 50 Index Fund will be managed by Jinesh Gopani. Here are the key details of the NFO:

NFO review: Axis Nifty Smallcap 50 Index Fund

About the strategy
The newly-launched fund would be the second to mimic 'Nifty Smallcap 50 TRI' after Aditya Birla Sun Life Nifty Smallcap 50 Index Fund. It would comprise the top 50 stocks based on full market capitalisation from the Nifty Smallcap 250 index (representing 250 companies ranked 251-500 as per full market capitalisation from the Nifty 500 index). Thus the primary objective of this underlying index is to capture the movement of the smallcap segment of the market.

In terms of sector diversification, the Nifty Smallcap 50 index seems to be heavily tilted towards Financial services, IT and Consumer goods, whereas the Nifty Smallcap 250 TRI has a more balanced weightage.

It must be noted that both these indices are market-cap based and thus, both these allocations would undergo a change as the market cap of their constituent companies change, whenever they undergo re-balancing, i.e., about twice a year.

Small-cap funds have been in the limelight lately due to the post-covid recovery on the bourses. While such funds can provide higher returns vis-à-vis diversified equity funds such as flexi-cap funds over the long term, this comes at the cost of relatively higher risk, given that they invest in less mature companies. At Value Research, we believe that small-cap funds add value in the long-term, aggressive growth portfolio. But they are meant to be a supplementary holding, which means that investors should avoid allocating more than 15-20 per cent of their portfolio into them.

About the performance
Amid the growing interest in passive investing, we compared the five-year rolling returns of the Nifty Smallcap 50 index with the Nifty Smallcap 250 TRI and other actively managed small-cap funds. We see that the majority of actively managed small-cap funds have beaten the indices. However, the Nifty Smallcap 50 index (a subset of the Nifty Smallcap 250 TRI), which this new fund is going to track, has consistently lagged over the last 10 years against both the actively managed small-cap funds as well as its parent index. Though, it is worth noting that these are historical trends and cannot be extrapolated into the future.

About the AMC
Axis Mutual Fund launched its first scheme in October 2009. 75 per cent of the AMC is owned by Axis Bank, while the remaining 25 per cent is owned by Schroders plc, a UK-based asset manager.

Axis Mutual Fund manages total assets worth over Rs 2,60,000 crore (as of January, 2022). It currently has 22 open-end equity funds that together comprise assets worth over Rs 1,42,000 crore. It manages 16 passive equity funds (index funds, ETFs and FoFs) which together manage over Rs 5,900 crore, ranking it 10th in the passive funds space. Out of these, it has only seven equity index funds with total AUM of not more than Rs 1,000 crore.

Also read: 3 questions you should ask before investing in an NFO

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