Investing in new fund offers (NFOs) is always fraught with risks. So, a fund with a closed-end structure that invests in the micro-cap category is to be viewed carefully.
The new fund offer of Sundaram Long-Term Microcap Tax Advantage Fund Series III, a closed-end scheme, is currently on (closing on November 11). This fund will invest in stocks that rank 301 and below by market cap on the National Stock Exchange. A tax-saver fund, it will allow investors to avail of tax deduction under Section 80C.
The good: The micro-cap space offers scope for identifying multi-baggers. To cite a couple of examples, groceries and garments are purchased in large-format retail stores now, rather than in small shops; movies are watched in multiplexes, rather than in single-screen halls, and so on. Entrepreneurs who can identify such nascent trends and fulfil customer needs stand to grow their businesses manifold within a decade. And, investors in such stock gain from the growth.
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