AssetPlus NFO Review - Nippon India Flexi Cap Fund

by Anushi Jain

Nippon Mutual Fund is launching an NFO, which is open for subscription from July 26th, 2021 to August 9th, 2021.

Investment Objective: The investment objective of the scheme is to provide capital appreciation by investing in an underlying fund of equity and equity related instruments. The fund will invest across market caps without any restriction.

Benchmark: NIFTY 500 TRI

Fund Management Process:

  1. The large cap portfolio will not have much deviation from benchmark while the small and midcap portfolio is where most of the alpha will be generated.
  2. The fund's primary focus while selecting large caps is to bet on safe names and well established leaders
  3. While selecting small and midcaps, the focus is on companies with high growth potential and which are new age businesses
  4. The core sectors the fund is looking at are banks, IT, pharma and chemicals. The fund will also be free to invest in other sectors like cement, consumer durables. etc.
  5. The fund will pick stocks with a growth style investing approach

Based on our analysis, we have observed the following pros and cons

Pros:

  1. No restriction on market caps. The ability to adjust the portfolio based on market valuations of different categories
  2. Lower in risk and volatility as they invest across market caps
  3. Exposure to high growth sectors can give good and consistent long term returns

Cons:

  1. Growth stocks and sectors have already rallied a lot. There is higher downside risk during market corrections with such stocks.

A flexi cap fund is safer than pure mid and small cap funds at these valuations. SIP's are the preferred mode of investment in this fund. Investors who are comfortable with short term volatility and want moderate to high alpha over a 5 year period can consider adding a small allocation to their portfolio.

It is of utmost importance that the fund should be discussed with your financial advisor and then ascertain whether it is suitable to invest. Always read the scheme documents fully before investing.