Nippon India Multicap Fund: Strong wealth creation track record

What are Multicap Funds?

Multicap funds are diversified equity mutual fund schemes which invest across market cap segments i.e. large cap, midcap and small caps. Multicap funds are among the most diversified among all equity funds because they are not only diversified across industry sectors, but also across market cap segments. Prior to September 2021, multicap funds had the flexibility to invest across market cap segments without any limits for any specific segment. However, as per SEBI’s circular in September 2020, multicap funds must invest at least 25% of their assets in large cap stocks, at least 25% in midcap stocks and at least 25% in small cap stocks.

What are different market cap segments?

1. Large cap: According to SEBI, the largest 100 companies by market capitalization are classified as large cap companies.


2. Midcap: SEBI categorizes 101^st to 250^th companies by market capitalization as midcap companies. There are 150 midcap stocks.


3. Small cap: 251^st and smaller companies by market capitalization are classified as small cap companies by SEBI.

Multicap funds have the advantage of providing diversification benefits across all the three market cap segments.

About Nippon India Multi-cap Fund

Nippon India Multi Cap Fund was launched in 2005 and has Rs 10,969 Crores of assets under management (AUM) as on 31^st October 2021. In terms of asset size, Nippon India Multicap Fund is the largest fund in the Multicap category. The expense ratio of the scheme is 1.89%, as on 31^st October 2021. The scheme seeks to invest across the market cap spectrum in high conviction stocks with focus on growth at reasonable price (GARP). The fund manager looks to identify opportunities ahead of the market.

Investment strategy

• The scheme invests across market cap segments, min 25% investment each in large, mid and small cap companies (as per SEBI’s mandate for multicap funds). The current market cap allocation is 47% large cap, 27% midcap and 26% small cap (as on 31^st October 2021).


• The fund follows a combination of top down and bottom up approaches and aims to take active sector calls.


• The fund is focused on key themes like:


• Consolidators across segments like Banking, Telecom, Out of home consumption etc. as these leaders are expected to witness significant improvement in profitability & market share on weakened competition, adoption of newer technologies etc.


• Manufacturing is at the cusp of a strong revival supported by optimistic growth outlook (Domestic & Global), Production Linked Incentives (PLI) and lower taxation.


• Structural secular growth opportunities in India where there is significant under-penetration like Insurance.


• The top sectors and stocks of the scheme are shown in the table below:-
  
  

  Source: Nippon India Mutual Fund, as on 31^st October 2021

  
  

Wealth creation track record

The chart below shows the growth of Rs 10,000 in Nippon India Multicap Fund since its inception. Your investment would have multiplied 15 times in the last 16 years or so. The CAGR returns of the fund since inception was 17.28% (as on 30^th November 2021).

Source: Advisorkhoj Research

The chart below shows the returns of Rs 10,000 monthly SIP in Nippon India Multicap Fund over the last 10 years. You can see in the chart below thatwith a cumulative investment of just Rs 12 lakhs, you could have accumulated a corpus of nearly Rs 27 lakhs. The annualized SIP returns (XIRR) since inception is 14.95%.

Source: Advisorkhoj Research

Alpha Creation

The table below shows the performance of Nippon India Multicap Fund versus its benchmark (Nifty 500 Multicap 50:25:25 TRI), and Nifty 50 TRI over various trailing periods. You can see that the scheme was able to outperform both its benchmark and Sensex in the last 1 year and over long investment tenures.

Source: Nippon India Mutual Fund, as on 31^st October 2021

Why invest in Nippon India Multicap Fund?

• Investment in large caps may help to capture market movements & aims to ensure liquidity in volatile times.


• Exposure to niche themes (primarily mid/small cap companies) having scalable business models aims to offer alpha.


• The fund has strong wealth creation track record.


• The fund aims to be well positioned to capture the current market opportunity and the likely shift in environment as economy stabilizes after the COVID shock.

Who should invest in Nippon India Multicap Fund?

• Investors looking for capital appreciation over long investment horizons.


• Investors with high risk appetites.


• Investors with minimum 5 years investment tenures.

Investors should consult with their financial advisors if Nippon India Multi cap Fund is suitable for their investment needs.