Should You invest in SBI Multicap Fund NFO

  

Should You Invest in SBI Multicap Fund NFO

SBI Mutual Fund is going to launch its New Fund Offer(NFO) SBI Multicap Fund, Which will open for subscription from 14th February to 28th February. This is an open ended equity scheme investing in large, mid and smallcap stocks. Earlier SBI Mutual fund has a fund named SBI Magnum Multicap Fund. Due to the change in SEBI guidelines, the multicap fund should have atleast 25% in largecap ,25% in Midcap and 25% in smallcap allocation in its fund. Hence SBI Mutual Fund convert the earlier SBI Magnum Multicap fund into flexicap Fund and launch a new fund SBI Multicap Fund.

What are Multicap Funds?

Multicap Funds are the diversified equity funds which invests in its corpus in all market cap stocks ie. Large cap stocks, midcap stocks and smallcap stocks. According to the  SEBI guidelines the a multicap fund must invest at least 25% of its corpus in each market cap stocks. Remaining 25% corpus can be invested in any market cap stocks. Largecap stocks are relatively stable companies with mature businesses. And are better equipped to withstand volatility. Midcaps are businesses with potential growth prospects at reasonable valuation. Smallcaps are the niche businesses in sunrise industries with an opportunity to generate higher alpha. 

Multicap = largecap(provides stabililty) + Midcap & Smallcap(can generate Alpha)

Aims to pull off right balance in your portfolio during favorable and unfavorable market conditions.

Market cap stock categorisation

Market capitalization of a stock is the number of outstanding shares multiplied by the current market price of the stock. According to the SEBI guidelines different market capitalisation stocks can be categorised in three segments.

1- Largecap Stocks - Top 100 companies in terms of market capitalisation are called largecap stocks. These are the dominant players in their industry with mature businesses with good track record. These stocks are very liquid in nature.

2- Midcap Stocks - Stocks from 101st to 250th in terms of market capitalisation are called Midcap stocks. These are the future largecap stocks having higher growth prospects, Typically emerging businesses. we can say that these are the growing companies.

3- Smallcap Stocks - Stocks from 251st onwards in terms of market capitalisation are called smallcap stocks. These are the young companies yet to flourish. These companies has the potential to become future multibaggers, But these stocks are illiquid and volatile in nature.

Advantages of Multicap Strategy

In different market cycles different market cap stocks behaves differently. During bull phase all market cap stocks outperform, But Mid and small cap stocks generate better returns as compared to large cap stocks. But during bear phase the large cap stocks fall less as compared to mid and small cap stocks. Which gives stability to the portfolio. So in multicap strategy a right balance maintained between large, mid and smallcap stocks.

Three major advantages of Multicap strategy

1- Limiting downside risk

2- Potential alpha Generation

3- Pulling off the right balance

Why invest in SBI Multicap Fund?

SBI Mutual Fund has a very good proven track record across different fund categories, has a best team of fund managers. This fund could be a combination of  power of diversification.

In terms of market capitalization

i - Diversified allocation across market capitalizations at all times

ii - 25% portfolio flexibility to invest in market cap agnostic manner

iii - No sector bios, sector allocation resultant of bottom up stock picking approach

In terms of high conviction  analyst portfolio

i - Combining the strength of high conviction stock ideas of the 15 sector analysts.

ii - Style agnostic as it may be the outcome of stock selection from the high conviction ideas

iii - Aims to invest in the best ideas across sectors

Suitable For

1- Millennials and first time investors - Investors looking for long term wealth creation(horizon >=5 years)

2 - Consolidation - Investors having multiple investment in different market caps, can consolidate through a single portfolio of three in one benefit.

3 - Long term investors - Investors looking for wealth creation for their long term financial goals.

4 - Direct equity investors - This could be a one stop solution for the direct equity investors who are holding individual stocks.

Fund Facts 

Fund Name - SBI Multicap fund is an open ended equity scheme investing across large ,mid and smallcap stocks.

Fund Manager - This fund will be managed by Mr. R Srinivasan.

Benchmark - Nifty 500 multicap 50:25:25 TRI Index

Minimum Application - Rs5000 and in multiple of re1 thereafter.

Minimum monthly SIP - Minimum Rs500 and in multiple of re1 thereafter.

Exit Load - Nil - If units purchased or switched in from another scheme of the fund are redeemed or switched out up to 10% of the units purchased or switched on or before 1 year from the date of allotment.

1% - If the applicable NAV , if units purchased or switched in from another scheme of the fund are redeemed or switched out in excess of the limit on or before 1 year from the date of allotment.

Nil - If  units purchased or switched in from another scheme of the fund for redeemed of switched out after 1 year from the date of allotment.

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Product Leveling

Product is suitable for investors who are seeking

- Long term wealth creation

- Investment predominantly in equity and equity related securities across  market capitalisation.

*Investors should consult their financial advisors if in doubt about whether the product is suitable for them 

Disclaimer - Mutual fund investment are subject to market risks, read all scheme related documents carefully