Publish Date:
Nippon India Mutual Fund will stop taking fresh lump-sum investments in its Nippon India Small-Cap Fund with effect from July 07, 2023. It is an open-ended equity scheme predominantly investing in small-cap stocks.
According to the Nippon India Mutual Fund’s notice-cum-addendum:
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Fresh, additional subscriptions, switch-ins will not be allowed or accepted at any point of time till further notice, from the effective date.
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Fresh registrations through Systematic Investment Plan (SIP) without initial investment, Systematic Transfer Plan (STP), or other special products will continue with a limit of Rs 5 lakh per day per PAN.
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All other features, terms and conditions pertaining to the above mentioned scheme shall remain unchanged.
Over the last few months, the small-cap space has seen higher than usual inflows owing to its good performance. Nippon India Mutual Fund has halted lump sum investments in Nippon India Small Cap Fund citing the rally in the small-cap space as the reason.
The fund house stated, “The limit on subscription of units of the Scheme is being proposed to facilitate gradual deployment of corpus in order to align with the nature of small cap investing. The step is warranted considering the recent sharp rally in the small cap space and increased investor participation through high ticket investments which would be in the best interest of existing unit holders and appropriate for incremental investments.”
Nippon India’s decision follows a similar move by Tata Mutual Fund, which had discontinued lump sum investments in its small-cap fund starting from July 1, 2023.
[Read: Fresh Inflows Into Tata Small Cap Fund Have Been Suspended by the Fund House]
Any fund house restricting fresh inflows is often a highly Scheme-specific decision as it depends on a variety of variables, including the fund's size and the AMC's comfort level with the deployment of newly received inflows.
Existing investors in small-cap funds need not worry or make any hasty decisions based on these events. Remember that timing the market is difficult, and here is no way to anticipate how long an asset class will continue to rise once it gains momentum. Small-cap funds are designed for long-term goals with an investment horizon of 7 to 10 years or more, and in order to succeed, investors in these funds must be prepared to withstand several market cycles.