Tata Small Cap Fund to stop accepting lump sum investments from July 1

As per the monthly data released by the Association of Mutual Funds in India, small-cap funds manage assets worth Rs 1.53 lakh crore.

Tata Mutual Fund has announced that it has decided to stop accepting lump sum amounts and switch-in investments in Tata Small Cap (TSC) Fund from July 1, 2023. The fund house has clarified that the lump sum and switch-in investments in TSC will be accepted until the cut-off time of June 30, 2023.

Going forward, the fund house will only accept investments through systematic investment plans (SIPs) and systematic transfer plans (STPs). All existing SIPs and STPs will continue and investors can also register new ones. There are no restrictions on redemptions and switch out of the scheme.

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TSC was launched in November 2018 and manages assets worth Rs 4,458 crore. Chandraprakash Padiyar and Satish Chandra Mishra manage the scheme. The scheme has emerged as one of the top performers in the small-cap category with 40.34 percent and 40.25 percent returns in one and three years, respectively.

Explaining the rationale for this move, Anand Vardarajan, Business Head – Banking, Alternate Products & Product Strategy, Tata Asset Management, says, "Our small-cap fund has been doing very well and has attracted strong inflows. However, due to the illiquid nature of small caps, deployment takes time, as one has to wait for the right opportunities. Chasing the stocks may drive up the price, thereby defeating the very purpose of investing. We want our investors to have a good investment experience."

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In the past, SBI Small Cap Fund and Mirae Asset Emerging Bluechip Fund had capped their inflows. Recently, HDFC Defence Fund also capped inflows through SIPs and STPs to Rs 10,000 per PAN per month.

Small-cap funds are getting consistent inflows and are among the sought-after investment avenues within the equity funds space. This is based on the expectation that a broad-based rally will likely reward investments in small-cap stocks.

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As per the monthly data released by the Association of Mutual Funds in India (AMFI), small-cap funds manage assets worth Rs 1.53 lakh crore. In May 2023, small-cap funds saw net inflows of Rs 3,282 crore. Small-cap funds, as a category, gave 32 percent returns in the last year ended June 23, 2023, topping the performance charts among diversified equity funds, as per Value Research data.