DSP Mutual Fund had recently informed that the fund house has revoked the temporary suspension of lumpsum investments in DSP Small Cap Fund Scheme.
Small-Cap funds: The front line stock price indices are almost down by 30 per cent and most investors including those who have invested in equity mutual funds are finding their fund values in deep red. The small-cap index has fallen more than large-cap and mid-cap indices and is down by nearly 45 per cent over 1-year. While some could consider this as an opportunity to buy as the share prices are down and the valuations too have fallen. Even mutual fund houses are looking for opportunities to cash-on the low current valuations. DSP Mutual Fund had recently informed that the fund house has revoked the temporary suspension of lumpsum investments in DSP Small Cap Fund Scheme with effect from April 1, 2020.
This means the investors may now start investing in DSP Small Cap Fund Scheme as a lumpsum investment in the fund. Earlier, DSP had first restricted flows into the Scheme in October 2014 to Rs 2 lakh per investor as it felt that further large inflows into the Scheme may prove detrimental to the interest of the existing unitholders.
In August 2016, DSP had further restricted flows into the Scheme to Rs. 1 lakh per investor. Thereafter, the Scheme had stopped fresh inflows altogether in February 2017. Finally, DSP had opened the Scheme for subscriptions only through SIP/STP route on September 3rd, 2018.
What to do
Companies will strong balance sheet, less debt and good cash reserves may still find buyers but overall falling demand, employment opportunities and economic growth will play an important role in the valuations of small-cap companies over the long term. This is more important in today’s time when businesses are facing a falling demand across most industries. Based on one’s risk profile and after consulting a financial advisor, one may take a small exposure in small-cap funds.