NFO Sundaram Select Micro Cap-Series I – Dec 2013
Sundaram Mutual Fund has launched the new fund offer of Sundaram Select Micro Cap- Series I, a Close ended scheme. The NFO opens for subscription on 16 Dec 2013 & closes on 30 Dec., 2013. No entry load will be applicable for the scheme.
Why a Micro-Cap Fund and why now?
- As the Indian economy booms we witness a large expansion in sales and profits of smaller companies which go on to become mega-caps; hence resulting in manifold increase in the stock prices.
- Buoyed by the recent state election results & a positive trend seen in the upcoming general elections the Indian stock market is set to witness a major uptrend( micro-caps tend to outperform in up cycles)
- Growth in the economy has bottomed out, recovery here to stay; micro-caps well positioned to capitalize in this recovery.
- Opportune time to launch the fund: S&P BSE Small Cap Index trading at a 32% discount to the S&P BSE Sensex( 11.4 PE for BSE Small Cap vs 16.8 PE for BSE Sensex-data as on 30th Nov,13)
Why invest in MNC’s?
- Technology leaders in various segments( e.g.-Amara raja Batteries, Wabco India) gives them immense pricing power
- India a vital market for global growth for various MNC’s hence a lot more importance is being paid to Indian subsidiaries
- As these MNC’s grow in India their export potential from India will be unleashed.
- Free-float in MNC’s has increased leading to cheaper valuations & managements becoming more accessible.
- Re-rating of MNC stocks due to increase in stake by parent co’s in the Indian subsidiaries.
- Micro-Cap MNC’s have demonstrated strong performance across market-cycles.
- Small Cap Index trading at 45% discount from historical high (BSE Small Cap Index PE of 11.3 in Nov,13 vis-à-vis PE of 20.8 in Jan,08)
- 217 micro-cap companies available at a PE of less than 5.
- Total universe of Micro-Cap stocks is 1273, total market cap of micro-cap stocks is 5.1 lakh crore.
· In the period 2003-2008 MNC micro-cap’s delivered 8x returns & 91% returns in the period 2008-2013 when other indices were negative/flat-huge outperformance displayed.
|Issue Details||Sundaram Select Micro Cap Series I|
|Issue Open||16 Dec 2013|
|Issue Close||30 Dec 2013|
|Issue Type||A five year close-ended equity scheme|
|Face Value||Rs 10|
|Minimum Application Amt||5000|
|Benchmark||S&P BSE Small Cap Index|
|Fund Manager||S Krishnakumar (Equity) & Dwijendra Srivastava (Fixed-Income)|
|Option||Growth & Dividend Payout|
To seek capital appreciation by investing predominantly in equity/ equity-related instruments of companies that can be termed as micro-caps. A company whose market capitalisation is equal to or lower than that of the 301st stock by market cap on the NSE at the time of investment will be considered to be in micro-cap category