The new ETF offering by Mirae is currently open and closes on May 17, while its Fund of Fund option will open from May 10 to 24. The Fund of Fund (FoF), which will invest in the ETF, is suitable for investors preferring systematic investment plans (SIPs).
The scheme will track the performance of 100 stocks of which 50 are mid-cap and 50 are small- cap stocks. These stocks are selected based on the combination of momentum and quality factors from NiftyMidSmallcap400Index, with stock weights being capped at 5%.
“This is a differentiated proposition for an investor looking for a single offering combining mid- and small-caps together,” says Vishnu Kant Upadhyay, AVP – research & advisory at Master Capital Services.
Analysts said index composition of mid-cap and small-cap stocks could help reduce sharp swings in returns.
“This combination provides reduced volatility compared to investing solely in small-cap stocks, leading to smoother portfolio performance,” says Kunal Valia, founder, Statlane.Analysts believe that given such a fund has a higher emphasis on the quality investment theme, investors need to come with a longer time frame especially when valuations in small- and mid-cap stocks are considered elevated. “Quality as a factor has had a tremendous decade from 2009-2020 as risk aversion caused investors to buy quality,” said Anish Teli, managing partner, QED Capital. “Post 2020 value as a factor has come back after a terrible decade. So investors should have a long-term horizon for investing in quality at this point in time.”Nifty 200 Quality30 has returned 419% in the period 2009-2020, compared to Nifty 500 Value 50’s return of 84%. From 2020-24 things reversed with the former returning 131% compared to the latter’s 452%.