Motilal Oswal Mutual Fund (MOMF) has launched four new index funds aimed at growth-seeking investors in the mid- and small-cap sectors. The new funds include Motilal Oswal Nifty MidSmall Healthcare Index Fund, Motilal Oswal Nifty MidSmall IT and Telecom Index Fund, Motilal Oswal Nifty MidSmall India Consumption Index Fund and Motilal Oswal Nifty MidSmall Financial Services Index Fund.

These new fund offerings (NFO) are now open for subscription from October 29 to November 6. A recent market study conducted by Motilal Oswal Asset Management Company (MOAMC) suggests an upward trend in the market. According to the study, mid and small caps have shown faster growth rates over the last 5 years than large caps.

Market cap data shows an upward trajectory, with mid-caps seeing an increase of 25.7%, small-caps seeing a growth of 28.0%, and large-caps seeing a higher growth rate. modest 19.1%.

Index funds designed for investors with a higher risk tolerance seek to capitalize on the potential for higher returns in the mid- and small-cap sectors. Although these sectors can be more volatile than large-cap companies, they offer significant growth opportunities.

The data further shows that the profitability of mid-cap companies increased by 25.2%, while that of small-cap companies saw a growth of 35.4%. In comparison, large-cap companies only grew 22.1%. Additionally, the market capitalization of mid-cap companies grew by 25.7% and that of small-cap companies by 28.0%, while that of large-cap companies grew by 19.1% over the of the same period.

The new index fund offerings are suitable for investors who want higher returns by investing in the mid- and small-cap sectors. Although they can be more volatile than large caps, they present significant growth opportunities for those willing to adapt to market fluctuations.

Key details

The Motilal Oswal Nifty MidSmall Healthcare Index Fund is an open-end fund that closely tracks the Nifty MidSmall Healthcare Total Return Index. The primary objective of this program is to achieve returns that reflect the total returns of securities in the Nifty MidSmall Healthcare Total Return Index, taking into account possible tracking errors. This fund is benchmarked against the Nifty MidSmall Healthcare Total Return Index as a benchmark.

Similarly, the Motilal Oswal Nifty MidSmall IT and Telecom Index Fund is an open-end fund that tracks the Nifty MidSmall IT and Telecom Total Return Index. The investment objective of this program is to generate returns that align with the total returns of the securities represented by the Nifty MidSmall IT and Telecom Total Return Index, while taking into account possible tracking errors. This fund is also benchmarked against the Nifty MidSmall IT and Telecom Total Return Index.

The Motilal Oswal Nifty MidSmall India Consumption Index Fund is an open-ended fund designed to reflect the performance of the Nifty MidSmall India Consumption Total Return Index. The primary objective of this program is to generate returns that align with the total returns of securities included in the Nifty MidSmall India Consumption Total Return Index, thereby allowing for margin for tracking error. The fund is benchmarked against the Nifty MidSmall India Consumption Total Return Index.

Similarly, the Motilal Oswal Nifty MidSmall Financial Services Index Fund works in the same manner, with the aim of tracking the Nifty MidSmall Financial Services Total Return Index. Its objective is to generate returns that match the total returns of securities in the Nifty MidSmall Financial Services Total Return Index, taking into account potential tracking errors. The fund is measured against the Nifty MidSmall Financial Services Total Return Index.

The four NFOs will be managed by Swapnil Mayekar (for the equity component) and Rakesh Shetty (for the debt component).

Prateek Agrawal, Managing Director and CEO, Motilal Oswal Asset Management Company Ltd, said, “The assets under management of the Indian MF industry increased from Rs. 9.16 trillion ($110.63 billion) in 2014, to Rs. 64.97 trillion ($780.70 billion) in July 2024, a growth of approximately 6 times in 10 years, demonstrating the potential of the industry. We believe that mid- and small-cap stocks have the potential to perform well over the long term, given that the market capitalization of mid- and small-cap companies has been growing at a faster rate than that of large-cap companies.

Pratik Oswal, Head of Corporate Passive Funds at Motilal Oswal Asset Management Company Ltd, said, “India benefits from extensive cross-channel usage to expand the reach of financial services. With 2,100 fintechs currently operating, India is poised to become one of the largest digital markets, driven by the rapid expansion of mobile and the internet. As the economy grows, consumer spending also increases, particularly in discretionary sectors, with the healthcare market expected to reach $638 billion and the information technology and telecommunications sectors, consumer and financial services expected to see significant growth by 2025. Although these sectors offer high growth potential, mid- and small-cap investments in these areas come with increased volatility, making them ideal for investors who are risk-tolerant and prepared for market fluctuations.