Axis Small Cap Fund Invest Online

It's a diversified equity scheme that aims to invest in small-sized companies

Closed-end equity schemes are being launched fast and furious in the Indian mutual funds (MF) industry. Axis Asset Management Co. Ltd is currently offering its Axis Small Cap Fund (ASC); a diversified equity scheme that aims to invest in small-sized companies. It will invest in companies whose market capitalization would be roughly between Rs.600 crore and Rs.5,000 crore. It is a five-year closed-end scheme where once you invest, your money gets locked in for five years. After five years, the scheme will become open-ended. Premature withdrawals will be possible on the stock exchange provided there are buyers.

What works?

The golden rule of equity investing is to buy into equities at a low and sell at a high. The fund house believes that small-sized companies—in addition to mid-sized companies—have seen their worst phases in the past five years and are now ready for take-off. According to the fund house, the difference in valuations between the CNX Nifty index (comprising of large-sized companies) and CNX Smallcap index (comprising of small-sized companies) has widened the most in recent times in September 2013, more than double than the gap prevalent in 2011. The fund house is one of the new kids on the block and has a good track record in managing funds across segments, especially equities. ASC's fund manager Pankaj Murarka has a good track record managing the MF's existing mid-cap scheme.

What doesn't?

It is a new scheme and therefore lacks a track record. Its tenor is five years. While this is a decent time period for a small-cap scheme to play out its theme, volatile markets may not allow you to exit prematurely if you want to book profits. There are fund houses that have launched single schemes that invest both in medium- and small-sized companies; a strategy we usually prefer on account of many investors' tendency to accumulate too many schemes in their portfolios. Fund houses like Axis Asset Management, though, have chosen to launch separate mid- and small-cap schemes. But then, as long as the schemes show performance, there's no harm really in this strategy as well.