MUMBAI:
In the last 17 years, if one looks at the top performers in the stock markets by market cap, large caps were the top performers in 7 years, mid-caps were the top performers in 3 years while small caps were the top performers in 7 years. The same is the story between growth and value style of investing with both styles outperforming during different time periods. This underscores the point that winners in the stock markets keep changing. The opportunities to invest in companies belonging to certain industries are also present only among certain market cap levels, requiring flexibility to invest across market caps.
DSP Mutual Fund announced the launch of DSP Multicap Fund, an open-ended scheme that offers investors the flexibility to invest across large cap, mid cap and small cap stocks, investment styles and industries. With dedicated market cap exposure to mid and small caps along with timely rebalancing, the multicap strategy offers investors better diversification and improvement in performance compared to the Nifty 500.
Despite investing in the same set of stocks, the multicap strategy has outperformed the Nifty 500 almost 8 out of 10 times over 5 year rolling periods between April 1, 2005 and November 30th, 2023.
The asset allocation of the scheme can be a minimum of 75% and a maximum of 100% in equity and equity related securities of which large, mid, and small caps can account for a minimum of 25% exposure and a maximum of 50%. The scheme can also have up to 25% exposure to equity and equity related overseas securities and Debt & Money Market Instruments and up to 10% in units issued by REITs and InvITs.
Currently, Small & Midcap stocks have outperformed large cap stocks by a wide margin and are also now more expensive on a trailing basis. This leaves the possibility for relative underperformance of the small & mid cap segment versus large caps in the near term. Historically, a fall in mid & small cap stocks have been excellent opportunities to collect more units which resulted in better returns when the market went up eventually. Hence, investors are recommended the SIP route which has shown to be a better strategy during market peaks as well as flat markets. The New Fund Offer for DSP Multicap Fund will open for subscription on January 8th, 2024, and will close on January 22nd, 2024.
“We believe, in the long-term, equity funds earn more than inflation and help us in growing our purchasing power. Equity investing is getting popular in recent times via direct stock investing, mostly in small caps. We also believe intermittently markets get exuberantly priced, especially currently in small & mid caps. These are times to be prudent. Believe in the long term but play defense in the near term. That’s where we would encourage the addition of 50% large caps – some global stocks too as there are opportunities in these two buckets and investors are ignoring these pockets.
Mostly, NFOs encourage lumpsum one-time investments. However, we believe these are times to invest via SIP and STPs – basically spreading investment over the next few years. Hence, we are launching a SIP focused DSP Multi Cap Fund. It adds more importance to large cap/global stocks to the current popular craze of small and mid-caps. Apart from market caps, there are different phases when growth style does well and then long stretches when value style does well. We will blend both these styles in our multi cap fund to ensure investors don’t need to time them and create tax efficiency,” says Kalpen Parekh, MD & CEO, DSP Mutual Fund.
