DSP Mutual Fund unveils unique DSP Nifty Smallcap250 Quality 50 Index Fund; NFO opens

To make investors' task of hunting a quality and fundamentally strong smallcap mutual fund easier, DSP Mutual Fund has come up with a unique offering, the DSP Nifty Smallcap250 Quality 50 Index Fund (DSP NSQ50IF). The open-ended scheme is a quality-focused small-cap fund run by the fund house.

As per the company, the fund has been introduced to reduce investors' dilemmas, who need to conduct aggressive due diligence on fundamentally strong small-cap companies for good returns.

The fund tracks the Nifty Smallcap 250 Quality 50 Index. It applies exclusion criteria and stock selection criteria to filter out companies that do not make the cut and choose 50 stocks that fit the criteria. The quality filters include return on equity, debt to equity, and earnings per share.

Hence, the Nifty Smallcap250 Quality 50 Index (Quality Index) has companies that have higher ROE and lower leverage compared to the Nifty Smallcap250 (Broader Index).

The Quality Index has outperformed its parent broader index since its inception. In 12 out of 19 calendar years, the Quality Index performed better than the broader index. In fact, on a 10-year basis, the Quality Index has always outperformed the broader index as well as active small-cap funds, the company said in its press release. 

The Quality Index has also outperformed in rallies and during falls compared to the broader index. Data also shows that the probability of better returns increases and negative returns decreases with longer tenure for the Quality Index compared to the Broader Index, the release added.

The New Fund Offer (NFO), i.e., a first-time subscription offering to the newly launched fund, opened today and will run until December 15.

“Smallcaps have the potential for outsize returns when held for the long term. However, the space is inherently vast, relatively less studied, and poses a challenge to investors in finding quality companies among small caps. Our passive offering aims to reduce the risk of capital loss by choosing ‘Quality’ companies with better fundamentals with an aim to keep wealth destroyers away to a great extent," said Anil Ghelani, CFA, Head, Passive Investments & Products, DSP Mutual Fund.

"We recommend investors invest in DSP NSQ50IF for the long term via the SIP route for a better experience across market cycles,” Ghelani added.