Nippon India Flexi Cap Fund: A promising fund for long term investors

Flexicap funds are diversified equity mutual fund schemes which invest across market cap segments i.e. large cap, midcaps and small caps. SEBI does not have segment wise limits for flexicap funds. The fund manager can have any allocation to large, mid and small caps, according to his / her market outlook.

Benefits of investing in Flexicap Funds

• Historical data shows that, winners rotate across market cap segments. You can get risk adjusted returns by diversifying across market cap segments.
  
  

  Source: National Stock Exchange, Advisorkhoj Research, as on 30^th November 2022. Large cap is represented by Nifty 100 TRI, Mid cap by Nifty Midcap 150 TRI and Small Cap by Nifty Small Cap 250 TRI. Disclaimer: Past performance may or may not be sustained in the future



• The chart below shows the growth of Rs 10,000 investment in Nifty 500 TRI versus Nifty 50 TRI. You can see that a flexicap strategy has the potential of creating alpha for investors.
  
  

  Source: National Stock Exchange, Advisorkhoj Research, as on 30^th November 2022. Disclaimer: Past performance may or may not be sustained in the future



• Higher alphas through active stock selection, especially in the midcap and small cap market segments; flexicap funds can invest in a universe of 500+ stocks.


• Flexi cap funds are highly suitable for investments through the Systematic Investment Plan (SIP) route. The midcap and small cap allocations of flexi caps are more volatile than large cap. You can take advantage of the volatility through Rupee Cost Averaging by investing through SIP.

Nippon India Flexi Cap Fund

Nippon India Flexi Cap Fund was launched in August 2021. The scheme has around Rs 4,300 crores of assets under management (AUM) with an expense ratio of 2.0%. The scheme attempts to create alpha through bottom up stock selection and appropriate allocation to potentially high growth themes. The scheme maintains reasonable allocations to established leaders.

Market cap allocation strategy of Nippon India Flexi Cap Fund

• For very large companies, the deviation (over/underweight) from its weight in Nifty 500 index will be low.


• Overall large cap deviation (over/underweight) from its weight in Nifty 500 index will be capped at 50%. This means that, the minimum large cap allocation will be 50% of large cap weight in Nifty 500.


• This means that the fund managers will have considerable flexibility to increase their allocations to small / midcaps to create alphas for investors, while ensuring some stability (lower downside risks) to investors in volatile markets.


• In the small and midcap segments, the focus of the fund managers will be on core growth and new age businesses.

Stock selection strategy of Nippon India Flexi Cap Fund

• Flexibility to invest across market cap segments to help capture changing market trends.


• Assess fundamental, macro, & sentiment factors to decide market cap allocation.


• Prudent risk management measures with an attempt to create optimal risk / return profile.


• Global cues are important - all traded markets are connected, hence price performance is often related.

Current investment themes of Nippon India Flexi Cap Fund

• Winners of consolidation due to technology/ regulation (financials, healthcare, retailing etc).


• Out of home consumption (consumer durables, hospitality, multiplexes etc).


• Outsourcing and China plus one (software, chemicals & manufacturing).

Why invest in Nippon India Flexi Cap Fund?

• Large investment universe – 500+ stocks


• Diversification across market cap segments


• Dynamic approach to investments across market cap segments


• Participation in companies with cutting edge technology


• Potential for outperformance across market cycles


• The recent market correction can provide attractive investment opportunities for long term investors


• Nippon India MF as an asset management company (AMC), has a strong long term performance track record of its schemes in all market cap segments, especially in mid and small caps


• “The go anywhere” approach coupled with Nippon India MF’s research capabilities (especially in small and midcaps) may help to generate alpha across market cycles

Who should invest in Nippon India Flexi Cap Fund?

• Investors seeking capital appreciation over long investment horizon


• Investors with minimum 5 year investment tenures


• Investors with high risk appetites


• You can invest in Nippon India Flexi Cap Fund either in lump sum or SIP depending on your investment needs and financial situation


• If you have lump sum funds but are worried about short term volatility due to high interest rates, you can invest in Nippon India Flexi Cap Fund through 3 to 6 months Systematic Transfer Plan (STP) from Nippon India Liquid Fund or any other low risk Nippon India debt fund. You can take advantage of volatility through Rupee Cost Averaging in STP

Investors should consult with their mutual fund distributors or financial advisors, if Nippon India Flexi Cap Fund is suitable for their long term investment needs.