Nippon Life India Mutual Fund restricts flows into smallcap fund

Cites recent sharp rally in the small cap space, says move will lead to gradual deployment of corpus

Nippon Life India Mutual Fund has decided to suspend fresh lumpsum inflows into Nippon India Small Cap Fund amid a steep surge in flow of investments into the smallcap mutual fund schemes.

Investments through existing systematic investment plans (SIPs) will not be affected, the fund house announced, adding that fresh SIP registrations will be allowed subject to per day per PAN cap of Rs 5 lakh.

"The limit on subscription of units of the scheme is being proposed to facilitate gradual deployment of corpus in order to align with the nature of small cap investing. The step is warranted considering the recent sharp rally in the small cap space and increased investor participation through high ticket investments which would be in the best interest of existing unit holders and appropriate for incremental investments," Nippon MF said in an addendum.

Nippon Life becomes the second fund house in two weeks to stop accepting lumpsum inflows into their smallcap scheme. Tata MF has also suspended lumpsum investments from July 1. SBI MF has long had such restrictions on its smallcap fund.

The MF industry has been receiving strong inflows into smallcap funds for some months now. In May, the net inflows had scaled to a record high of Rs 3,280 crore.

Industry players said that valuations of small-cap stocks have increased and there are concerns that if inflows continue at this pace, there could be a challenge in deployment of these funds.

The Nifty Smallcap 250 index has surged 22 per cent in the last three months.