Nippon India Mutual Fund has announced modifications to the exit load structure for its Nippon India Small Cap Fund, effective March 22, 2024 in response to recent stress test findings and industry trends.
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The alteration entails a shift from the previous exit load policy of "1% for redemption within 30 days" to a revised structure of "1% for redemption within 1 year."
According to Nippon India Mutual Fund's stress-test report, the fund anticipates a liquidation timeline of up to 27 days to divest 50% of the small-cap fund's holdings, with a shorter duration of 13 days for offloading 25% of assets.
The unveiling of stress test outcomes by various fund houses follows directives from the Association of Mutual Funds in India (AMFI).
Recently, Motilal Oswal Mutual Fund also revised the exit load structure for its mid- and small-cap funds, setting the exit load at 1% for redemptions made within one year from the date of allotment, as opposed to the earlier policy of 1% for redemptions within 15 days, effective from March 18.
The alteration in exit load policy may raise concerns among investors regarding the impact on their investment strategies and returns.
Short-term investors may find the new rule less favourable as it imposes a penalty for early redemptions within one year.
However, long-term investors may see this as a positive step towards enhancing fund stability and aligning with prudent investment practices.
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