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Motilal Oswal Asset Management Company (MOAMC) has announced the launch of Motilal Oswal Nifty Microcap 250 Index Fund, India’s only passive fund offering exposure to microcap stocks. The fund aims to provide investors an opportunity to participate in the growth potential of microcap stocks. Motilal Oswal Nifty Microcap 250 Index Fund is an open-ended fund replicating/tracking total returns of Nifty Microcap 250 Index. The NFO period commences on 15^th June and closes on 29^th June 2023.

The Nifty Microcap 250 Index is designed to measure performance of the top 250 companies excluding those already present in the Nifty 500 constituents. The index is well-diversified, with its top 10 holdings accounting for only 11% as against 59% in Nifty 50 Index. Further, it provides diversified exposure to sectors like Industrials, Consumer Discretionary, Commodities, and Healthcare that are usually underweight in broad-based market indices.

Over the last 3 years the Nifty Microcap 250 Index has delivered 58% on an annualized basis. While microcaps exhibit strong performance potential, it may also experience higher volatility and extended periods of underperformance to broad-based market indices.

Why microcaps?

Microcap companies which comprise approximately 3% of the total market capitalization of listed stocks, poses distinct characteristics that make them intriguing investment prospects. These companies are known for their agility, niche market focus, and strong promotor-driven dynamics.

It is worth noting that, Microcaps often fly under the radar of research analysts, with more than 40% of companies receiving no analyst coverage at all and only 12% of the stocks have more than 5 analyst coverage. In fact, less than 4% of mutual fund industry’s AUM is invested beyond top 500 companies. This creates a higher likelihood of finding hidden opportunities.

Moreover, various studies have indicated that small companies tend to outperform their larger counterparts, due to factors like illiquidity premium, small company risk premium etc. This makes investing in microcaps an attractive investment proposition.

Navin Agarwal, MD & CEO, Motilal Oswal Asset Management Company Ltd said, “We have been pioneering in many passive funds in India. Our latest Microcap based index fund offering will further expand our wide range of passive funds. By launching the Motilal Oswal Nifty Microcap 250 Index Fund, we offer investors a natural extension of the Motilal Oswal Nifty 500 Index Fund, complementing our existing range of broad-based index funds.”

Pratik Oswal, Head of Passive Funds, Motilal Oswal Asset Management Company Ltd said, “With the Motilal Oswal Nifty Microcap 250 Index Fund, we lead the charge in unlocking the untapped potential and opportunities of this distinctive investment category. We believe that the segment holds immense potential and unique investment opportunities that have been overlooked by many in the industry.”

Pratik Oswal further added that “Microcaps have compelling track record of delivering higher returns compared to its counterparts, albeit at a higher risk. Investors are encouraged to consult their financial advisors, a prudent allocation of 5-10% to this fund may help enhance overall portfolio returns”.

The investment objective of the scheme is to provide returns that, before expenses, correspond to the total returns of the securities as represented by Nifty Microcap 250 Index, subject to tracking error. However, there is no guarantee or assurance that the investment objective of the scheme will be achieved. The Indicative Base Total Expense Ratio of the fund: Regular – 1.00%, Direct – 0.40%.

The Minimum Application amount for Motilal Oswal Nifty Microcap 250 Index Fund is Rs. 500/- and in multiples of Re. 1/- thereafter. On ongoing basis investor can purchase/redeem units of the Scheme through financial advisor or by log-in to www.motilaloswalmf.com.

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