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MO-AMC has introduced an industry-first microcap index fundwhich will invest across stocks ranked from 501-750 by market cap (currentmarket cap range is from 10000 crs to 2500 crs). This is one step below thesmall cap index which covers stocks from 251-500 on market cap.
The microcap index has outperformed the small cap index on anabsolute as well as risk adjusted basis over the last 3 yr period – that said,volatility is higher and therefore best suits only experienced aggressive alphaseekers.
Lack of sufficient sell side coverage makes an active fund acost inefficient solution – hence the preference for a passive fund.
PE multiples are very misleading in this segment – difficultfor investors to time their entry and exit based on historical valuation bands.Jatin suggests an SIP to test the waters and then go in with upto 5% of yourequity exposure, once you develop confidence.
Fund will be able to handle daily buy/sell to the tune of10-15 crs without having a material impact cost on the smaller stocks in theindex’s basket. Jatin cautions us to expect a potentially higher tracking errorin this fund compared to small and mid cap index funds – but remains confidentthat this fund has the potential to outperform mid and small cap index fundsover a market cycle despite this.
