AMFI has just released its September mutual funds’ report and there is revealed that investors have been heavily investing in multi-cap funds. The net inflow into the category has been at the highest among equity fund categories at Rs. 3569 crore, followed by sectoral and flexi-cap fund schemes that raked in a sum equivalent to Rs. 2000 crore each.
Likewise, as investors’ interest in the category remains intact even after the SEBI’s new mandate on the fund category here we will have a brief discussion on the fund category together with top CRISIL and Morningstar rated multi-cap funds that you can consider for SIP investment.
What are Multi-cap funds?
Last year, SEBI came up with a new ruling on multi-cap funds which mandates it to invest a minimum of 25 percent each in large cap, mid cap and small cap stocks of the total assets under management of the scheme. Say in case the scheme’s AUM is Rs. 10000 crore then a minimum of Rs. 2500 crore will be deployed towards each of the large cap, mid cap and small cap categories. Rest the fund house can invest as per its discretion.
Why the new mandate for multi-cap schemes?
Until the new directive, most of the multi-cap schemes had their major allocation into large cap companies but the ruling has henceforth provided clear distinction between large cap and multi-cap funds.
Features of Multi-cap funds:
1. Enable exposure across market capitalizations i.e. large cap, mid cap and small cap, so the investor not willing to invest specifically in each of these fund categories can in fact benefit from this single mutual fund category.
2. Can generate substantial returns during bull market phase and can even outperform plain large or mid-cap fund.
3. Suitable for moderate risk-appetite investors who aim at getting stable returns by investing in large caps but also can deploy some amount into mid and small caps for realizing better returns.
4. Gains on equity funds are subject to taxation @ 15% for holding period less than 1 year and @ 10% for more than a year if gains are more than 1 lakh.
Multi-cap funds: When will investing in multi-cap funds be a good choice?
If an investor wants to spread his or her investment across market capitalization then certainly multi-cap funds would serve the purpose. Herein, large cap stocks in the portfolio will function as a safety buffer, while the mid and small cap exposure will work to boost return. In the current economic environment, when the markets have been steadily rising and there is immense uncertainty surrounding economic recovery and hence there can be a case of heightened volatility going ahead, investors will be better off investing across market-capitalisations.
Top rated multi cap funds by CRISIL and Morningstar
Top rated funds are typically promising mutual funds that over the period of time have given good returns. Rating agencies employ a host of factors in arriving at a particular rating for the fund and it could be a good criterion to choose a fund. Typically, it bodes well to choose a fund that has a good historical performance.
|Multi-cap fund||CRISIL Rating||Morningstar rating||1-year SIP returns||3-year SIP returns||5-year SIP returns||10-year SIP returns|
|Quant Active Fund Growth||5-star rated||5-star rated||75.45%||50.65%||32.76%||24.00%|
|Mahindra Manulife Multicap Badhat Yojana-G||4-star rated||NA||72.83%||40.64%|
|Invesco India Multicap fund-G||4-star rated||NA||57.29%||33.76%||20.77%||19.09%|
Mutual Fund investing is subject to market risks. One should exercise caution and invest only if he or she is able to bear losses. The above article is for information purposes only. Neither the author nor Greynium Information Technologies would be responsible for losses incurred on decisions based on this article. Please be careful and consult an advisor before investing.