Financial Daily from THE HINDU group of publications
Tuesday, Jul 19, 2005
Financial Daily from THE HINDU group of publications Tuesday, Jul 19, 2005 |
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Markets
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Mutual Funds Midcap funds changing tack to suit new index norms Nilanjan Dey
Kolkata , July 18 MIDCAP funds are changing tack in line with the introduction of the new CNX Midcap Index, which has replaced the earlier CNX Midcap 200 with effect from today. Fund houses which use the NSE index as their benchmark, have been busy writing to unit holders, seeking their approval in view of the decision taken by NSE to introduce the new-look index. The changes in definition of midcap stocks and the asset allocation are being effected in the context of the schemes' investment objectives. As India Index Services & Products Ltd (the company that manages the NSE indices) has pointed out, the latest benchmark will comprise 100 stocks as compared to 200 used earlier. Take, for instance, HSBC MF's Midcap Equity Fund, which has worked out certain modifications in the offer document. The change in asset allocation pattern is a result of the earlier index being discontinued, unit holders have been informed. The MF, which has added that an alteration in a scheme's asset allocation amounts to a change in its fundamental attributes, has given investors an option to redeem at the prevailing NAV without any exit load. The option will be available for them up to August 9. CNX Midcap 200, according to IISL, represented the "medium capitalised segment of the stock market". For the record, it accounted for roughly 72 per cent of the total market capitalisation of the mid-cap universe and about 70 per cent of its total traded value. This `mid-cap universe' related to stocks with average six months market cap in the Rs 75-750 crore range. As for CNX Midcap, the exchange has conceded that the medium capitalised segment is being increasingly perceived as attractive, complete with high growth potential. The new index has a base date of January 1, 2003 and a base value of 1000. Stocks are chosen by IISL on the basis of trading interest in terns of volumes and trading frequency. Besides, all constituents of the index must have a minimum listing record of six months. The companies must also have a minimum track record of three years of operations with a positive net worth. As things stand, most funds in the category seek to invest at least 65 per cent of their assets in mid-cap counters. There are eight funds - including schemes managed by UTI, Birla, SBI and Tata - that actually carry the mid-cap tag at the moment. A number of others, all of which are known by other names, have been heavily investing in such stocks.
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