Groww Multicap Fund: Good diversified fund for long term investors

Current market context

The market has been very volatile for the last 4 months. Heavy selling by Foreign Institutional Investors’ (FII) due to weakening Rupee and concerns about earnings growth, has led Nifty correcting by nearly 12% from its 52-week high. The FY 2025-26 Union Budget had several fiscal policy measures e.g. income tax cuts, higher infrastructure spending etc, to boost economic growth. The Reserve Bank of India (RBI) also took monetary policy measures like cutting the Cash Reserve Ratio (CRR) by 50 bps and the repo rate by 25 bps in the last MPC meeting. However, the trade policies of the Trump Administration have weighed heavy on the market.

In the initial phase of the correction large cap stocks bore the brunt of the FII sell-off, but the broader market, especially small cap stocks, saw deeper cuts in the last one month or so (see the chart below). Though Q3 results show muted revenue and earnings growth due to slowdown in consumption, the deep correction has created attractive investment opportunities across all three market cap segments for long term investors.

Source: NSE, Advisorkhoj. All indices have been rebased 1,000 as on 1^st September 2024. Period: 1^st September 2024 to 12^th February 2025.

Valuations have come down across all market cap segments

The sharp correction has brought down valuations across all the market cap segments, especially large caps (see the chart below). Though we may have to see some more pain in midcaps and small caps, a multi-cap strategy may be suitable for long term investors. In this article, we will review Groww Multicap Fund which was launched a few months back.

Source: NSE, Advisorkhoj. As on 31^st January 2025.

The case for Multicap strategy for long term investors

• Winners keep rotating between market cap segments depending on market conditions investment cycles.
  
  

  

  Source: NSE, Advisorkhoj. As on 31^st December 2024



• Winners continually rotate among various sectors, making broad sector exposure an important factor to consider, when aiming to enhance opportunities.
  
  

  

  Source: NSE, Advisorkhoj. As on 31^st December 2024



• Each market cap segment has unique industries, making Multicap funds one of the potentially most efficient ways to aim for diversification of a portfolio. Certain sectors have market leaders beyond large caps. Exposure to market leaders might require diversification across market caps. Multicap is an effective strategy to capture the diverse opportunity set in the India Growth Story
  
  

  

  Source: Groww MF



• Multicap index has outperformed the market cap weighted broad market indices like Nifty 50 and Nifty 500 TRI over the last 10 years
  
  

  

  Source: NSE, Advisorkhoj. As on 2^nd February 2025

Investment philosophy of Groww Multicap Fund

Current Portfolio Positioning

The fund is currently sitting on cash (for a substantial part of the portfolio). waiting for the right opportunity as the market discovers the price level in current conditions. This strategy may give the fund an advantage vis a vis peers who may be burdened with legacy stocks.

Source: Groww MF, as on 31^st January 2025

Suitable for SIPs

As per SEBI’s mandate a Multicap fund should invest minimum 25% of their assets in each of the three market capitalization segments i.e. minimum 25% in large cap (top 100 stocks by market cap), minimum 25% in midcap (101^st to 250^th stocks by market cap) and minimum 25% in small cap (251^st to 500^th stocks by market cap). Since Multicap funds are likely to have higher allocations to midcaps and small caps compared to other diversified equity funds which invest across market cap segments, they tend to be more volatile. Disciplined investors can take advantage of this volatility by investing through SIP. The chart below shows the growth of Rs 10,000 monthly SIP in Multicap index over the last 10 years ending 31^st January 2025. With a cumulative investment of around 12 lakhs in Nifty 500 Multicap 50:25:25 index, you could have accumulated a corpus of nearly Rs 30 lakhs (see the chart below).

Source: NSE, Advisorkhoj. As on 1^st February 2025

Why invest in Groww Multicap Fund?

• Capitalize on diverse growth opportunities in the India growth story. Winners can emerge from anywhere, and winners keep changing


• Mid Cap and Small Cap categories can be growth pockets.


• Among themes / sectors, Export, premium consumption, financialization, infrastructure and import substitution can provide attractive growth opportunities


• Fresh portfolio with no legacy stocks


• True to label Multicap with the flexibility of allocating of the remaining 25% depending on market conditions to maximize returns or optimize risks

Who should invest in Groww Multicap Fund?

• Investors who are looking for capital appreciation over long investment horizon


• Investors with high to very high-risk appetites


• Investors with minimum 5 years investment tenures


• You can invest in this scheme either in lump sum or SIP depending on your investment needs


• Investors should consult with their financial advisors or mutual fund distributors if Groww Multicap Fund is suitable for their investment needs.