Multi cap mutual fund schemes see large inflows; should you invest?

Multi cap mutual funds witnessed a net inflows of Rs 10,500 crore, ahead of all other equity mutual fund categories, in December, shows AMFI monthly data. Investors have been cold shouldering multi cap schemes after the introduction of flexi cap schemes, that is why the sudden jump in collection raised interest.

The category saw inflows worth Rs 3,38.41 crore in October and Rs 3,47.62 crore in November, 2021. The December figure was almost three times. Another interesting data point is that of the Rs 10,500 crore inflows in multi cap schemes in December, Rs 9,509 crores were contributed by new funds launched in the same month.

Three NFOs from the category which cumulatively collected INR 9,509 crores have led to the big inflows this time. Axis Multi Cap Fund; HDFC Multi Cap Fund and IDFC Multi Cap Fund were launched in the month of December and had collected big inflows.

“Given the market scenario, NFOs continued to attract investor focus. Overall, there were 6 NFOs during the month – 3 each from Multicap and Sectoral/Thematic Funds category, and cumulatively garnered assets worth INR 12,446 crores. Hence, NFOs accounted for almost half of the month net inflow,” sais Himanshu Srivastava, Associate Director, Manager-Research, Morningstar India.

Secondly, multi cap funds have been outperforming flexi cap funds because of their mandatory higher allocation to small cap stocks. In the last one year, small cap segment has seen a rally and that has favored multi cap funds. As per Value Research, multi cap funds have offered an average return of 40.72% in one year compared to 30.57% average returns offered by flexi cap funds.

Multi cap schemes 1-year returns (%)
Quant Active Fund 55.50x
Mahindra Manulife Multi Cap Badhat Yojna 52.32
Nippon India Multi Cap Fund 48.28

“With Sebi‘s categorisation rules, AMCs now can’t launch multiple schemes in one category. After the formation of flexi cap category, fund houses had a scope to launch new schemes in multi cap category. A category that was already well known and was performing well. Hence NFOs like HDFC and Axis garnered big inflows at this point pushing the multi cap category up on the inflow chart,” says Subir Jha, Founder, BuckSpeak, a wealth management firm, based in Hyderabad.

Mutual fund planners suggest that even though multi cap funds are a good addition to an investor’s portfolio- one should not invest just on the basis of the near-term performance and AMC sales push. Investors should gauge if they can take the risk of a 25% allocation exarch to small and mid cap stocks in the portfolio. If yes, one should invest in schemes that have a proven track record and avoid new fund offers.


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