2 min read.Updated: 05 Nov 2020, 09:46 PM ISTNeil Borate
Mirae Asset MF has sharply lowered its cap on fresh SIPs from ₹25,000 to ₹2,500 in its flagship Emerging Equities Fund
Fund house decisions on flows have proved a useful valuation indicator in the past, such as the 2016 SIP cap by Mirae
Mirae Asset MF has sharply lowered its cap on fresh SIPs from ₹25,000 to ₹2,500 in its flagship Emerging Equities Fund with effect from 7 November. Existing SIPs will not be affected. In 2016, the AMC had halted lump sum investments in the scheme and permitted SIPs up to ₹25,000. The current decision is to further tighten inflows.
Mirae Asset Emerging Bluechip Fund has delivered a compounded annual growth rate (CAGR) of 19.13% since its launch in July 2010 and is the top performing diversified equity scheme over the past 10 years. The Nifty hit 12,120 on 5 November, close to its all-time peak of 12,352 despite a 23.9% contraction in the first-quarter GDP for FY21 and a full-year contraction pegged by economists close to 10%.
“The SIP book is almost ₹280 crore per month for the fund. In today’s market that is a significant inflow. We just want to take as much money as our stocks can absorb," said Swarup Mohanty, CEO, Mirae Asset Mutual Fund. Mirae Asset Emerging Bluechip hit a size of ₹11,466 crore as on 30 September 2020. “Back when we shut down lump sum flows in 2016, the fund size was ₹2,600 crore," he added.
A large-and-mid-cap fund must invest a minimum of 35% of its corpus in large-cap companies and 35% in mid-caps. According to data from Value Research, the fund invests about 58% of its corpus in large-caps, 37% in mid-caps and the rest in small-caps and this could be a key reason for the fresh restriction. The mid- and small-cap segments in India, typically, have far lower liquidity than large-caps.
“The decision to restrict SIPs is an outcome of stretched market valuations as well as the issue of deployment of money in the mid-cap space which has low liquidity. Mirae has prioritized investor interest over asset gathering in the past and you can read this as a valuations signal," said Kirtan Shah, chief financial planner, Sykes and Ray Equities (I) Ltd, a mutual fund distributor.
Fund house decisions on flows have proved a useful valuation indicator in the past, such as the 2016 SIP cap by Mirae and the stoppage of all flows by DSP Small Cap Fund in February 2017. Mid- and small-cap stocks underperformed against their large-cap peers after peaking in 2017. The Mirae action this year is not isolated. In September 2020, SBI Small Cap Fund closed itself to lump sum flows. But these signals should only be one of several factors that investors should consider.