DSP Mutual Fund Launches India's First Passive Flexicap Fund DSP Nifty500 Flexicap Quality 30 Index Fund.

On August 7, 2025, DSP Mutual Fund, a subsidiary of the DSP Group, launched the DSP Nifty500 Flexicap Quality 30 Index Fund, marking India's first passive flexicap fund. This fund is developed in partnership with the National Stock Exchange (NSE) and combines quality-only stocks with a dynamic market capitalization allocation strategy driven by momentum.

      - The fund is designed to replicate the Nifty 500 Flexicap Quality 30 Index. This index selects 30 high-quality stocks, choosing 10 stocks each from the Nifty 100 (large-cap), Nifty Midcap 150, and Nifty Smallcap 250 indices. These stocks are selected based on quality factors such as return on equity (ROE) and low debt-equity ratio, ensuring strong fundamentals in the portfolio.

      - A key feature of the flexicap fund is its flexibility in investing across large, mid, and small-cap stocks without fixed allocation limits. This allows fund managers or the index methodology to shift investments dynamically depending on changing market conditions, optimizing returns and risk management according to market momentum.

      - The fund actively adjusts its exposure between small and mid-cap stocks (SMID) and large-cap stocks every quarter. This adjustment is based on the moving average of 200 days, allocating either 33% or 67% to these segments, which helps in capturing the changing trends in different market capitalization segments effectively.

Main Point :-   (i) In terms of stock selection, the index identifies 10 companies each from large-cap, mid-cap, and small-cap segments using key metrics such as Return on Equity (ROE), debt levels, and earnings growth. This quantitative approach ensures that only financially strong companies with growth potential are included in the portfolio, maintaining the quality focus of the fund.

      (ii) The fund also assigns equal weight to each stock within its respective market segment, maintaining balance and diversification across the portfolio. This equal weighting minimizes concentration risk and ensures that performance is not overly dependent on any single stock or sector.

(iii) Despite being passive, the fund addresses challenges like identifying high-quality stocks and automating the optimal allocation to large, mid, and small caps at a low cost. The passive nature means it does not rely on active decisions by a fund manager, but rather follows the rules of the underlying index, ensuring cost efficiency and transparency for investors.
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