The SBI Magnum Midcap Fund is among the leading open-ended equity funds available to investors from the SBI Mutual Fund AMC. The fund is open for investment and/or redemption as per the individual user’s choice, however, exit loads and tax considerations may be applicable in certain cases. The fund is focused on generating long-term capital appreciation for the investor by investing exclusively in midcap companies when considering equity investments. Some other key investment alternatives to equity which may be considered depending upon specific market conditions would include debt funds, money market instruments, liquid securities, derivatives, cash, etc. However, these alternative investments would comprise only a minor portion of a portfolio dominated by midcap equity investments.
SBI Magnum Midcap Fund Key Features and Statistics
The following are some of the key features and statistics of the SBI Magnum Midcap Fund:
Fund Type: This mutual fund is an open-ended equity fund which features a high degree of exposure to mid-cap equities. As a result, investors are free to invest in the fund at a time of their choosing and also to redeem as per their investment target/requirement.
Capital Allocation: Being an equity mutual fund, a majority of the portfolio of the SBI Magnum Midcap Fund would consist of equity and equity-related instruments with a bias towards mid-cap companies. Such equity investments would account for between 65 and 100% of the fund’s total AUM. Depending upon specific market requirements, up to 45% of the capital available to the mutual fund would be invested in other instruments. Some of the leading alternative investment options available to the fund include equity and equity-linked investments of small and large capitalisation companies, foreign securities, American depositary receipts, global depositary receipts as well as various money market and debt instruments. However, the cumulative value of these investments cannot exceed 35% of the total AUM of the SBI Magnum Midcap Fund.
Investment Strategy: This mutual fund would invest in a highly diversified range of equity shares belonging to companies in the middle level of capitalisation. According to the definition being followed by SBI Mutual Funds, midcap companies are those that rank between 101st and 400th position on the capitalisation market scale of Indian stock exchanges. All companies between 1st and 100th rank on the scale, are termed as large cap companies and smallcap companies would rank 401st and below on the same scale.
Risk Profile: Investment into this scheme of SBI Mutual Funds includes the risk of possible loss of the principal amount invested into the scheme. This is because of the high level of exposure to equities and as the returns of the scheme are market-linked, there is some risk of volatility in daily NAV of the fund. Moreover, the SBI Magnum Midcap Fund may be affected by liquidity restrictions as a result of changes in trading volumes and settlement periods. In extreme cases, if too many redemptions are attempted by investors of the scheme or if a portfolio restructuring is underway, such liquidity restrictions may be extended over a longer time periods.
Risk Control: The fund manager and his team would attempt to control various aspects of the risk inherent to the SBI Magnum Midcap fund include various strategies to manage such risks while maintaining an acceptable degree of growth for the scheme. In order to achieve this end, the fund manager and the team would create a portfolio of investments for the scheme, which would adhere to the key investment restrictions that are specified as part of the regulations governing this equity fund from SBI Mutual Funds. Additional risk management would involve the involvement of the SBI Mutual Fund AMC, which would also have the necessary framework in place to manage the risk at an enterprise level. In order to manage the liquidity risk of the scheme, the portfolio of this mutual fund would feature a significant degree of diversification such as that across multiple industries. The volatility risk of this would be managed by the two-pronged strategy of diversification across various sectors as well as the use of various derivatives, which are capable of hedging many of the risks inherent to market-linked equity investments. The interest rate risk to equity investments due to changing interest rates in the market would be brought under control by including interest rate derivatives into the portfolio and rebalancing the portfolio as necessary. Concentration risk or risk derived from exposure of the mutual fund to a specific scheme would be achieved through a carefully planned sector agnostic diversification.
Plans and Option Available for the SBI Magnum Midcap Fund
The plans and options available in case of the SBI Magnum Midcap Fund are as follows:
Regular Plan: An investor interested in making investments in the SBI Magnum Midcap Fund through a third party broker or broking house. The regular plan of SBI Magnum Midcap Fund features a higher expense ratio as compared to the direct plans on offer from the fund. As a result of the higher expense ratio, the NAV of units in case of the regular plan are slightly lower than those observed in the case of the direct plan and so are the returns at the time of redemption. An investor can invest in the regular plan of this fund through the Paisabazaar.com mutual fund investment platform.
Direct Plan: An investor can opt for the direct plan of SBI Magnum Midcap Fund only if the investment is being made directly through the SBI Mutual Funds AMC. The direct plan features a lower expense ratio, which bolsters the NAV of the individual fund units in the long run. The direct plan investment usually features a lower AUM value as compared to the regular plan and both the dividend and growth options are available to an investor opting to invest in the fund through the direct plan.
Dividend Option: Just like equity shares, mutual funds can also declare dividends when they have made a profit and decide to share it with the investors. However, as returns in case of the SBI Magnum Midcap Fund are market-linked, there is no guarantee that dividends will be declared by the fund. When dividends are declared and paid out, the NAV of the individual units decreases by an amount equal to the When opting for the dividend option of the fund, an investor can choose among the dividend-reinvest and dividend-payout options. In the case of the dividend payout option, the amount declared as the dividend is automatically transferred to the investor’s registered bank account and it can be easily withdrawn or otherwise used by the investor. The dividend-reinvest option works a bit differently. In this case, the dividend earned is automatically converted into mutual fund units of the same value and added to the existing count. Thus, over time, the investor increases the number of units of the fund he/she has in his/her portfolio. This option is usually preferred by investors seeking periodic returns from their mutual fund scheme.
Growth Option: If an investor chooses to invest using the growth option of the SBI Magnum Midcap Fund, no dividends will be received by him/her during the investment period. Any profits earned by the fund would be invested in the fund it, which will cause the AUM of the mutual fund to increase leading to an increase in the fund’s NAV over its previous levels. Therefore, when the investor decided to withdraw from the scheme through the redemption of switch existing units to a different scheme, the NAV can potentially be considerably higher than the NAV at the time of investing. When this happens, the investor books a profit on his/her investment. These profits may or may not be subject to Capital Gains tax or exit load depending on whether the units were held for more than 12 months or less. The growth option is thus preferred by investors who are seeking potentially high capital appreciation of their initial investment into the scheme.
Tax Considerations of the SBI Magnum Midcap Fund
The SBI Magnum Midcap Fund is an equity mutual fund, hence existing short-term capital gains taxation rules are applicable at the time of redemption. As per existing criteria, in case units of an equity mutual fund investment are redeemed or switched out prior to completion of 12 months from the date of allotment, short-term capital gains tax of 15% is applicable on the total value of units redeemed/switched out. Alternately, in case the units have been held for a period of 12 months or more at the time of redemption/switching out is tax exempt. Moreover, all dividends earned from the SBI Magnum Midcap Fund either as part of the dividend-reinvest or the dividend payout option is completely tax exempt.
Top Investments of the SBI Magnum Midcap Fund
The SBI Magnum Midcap Fund is primarily invested in equities of emerging companies with a medium level of capitalization. The following is a snapshot of the diverse portfolio of this midcap fund offered by SBI Mutual Funds AMC*.
|Pharmaceuticals||Strides Shasun, Dr. Lal PathLab, Natco Pharma, Sanofi India, Laurus Labs, Sequent Scienti, Divis Labs, Indoco Remedies, etc.|
|Engineering and Capital Goods||Carborundum, Greaves Cotton, Sadbhav Engineering, Va Tech Wabag, Thermax, SKF India, FAG Bearings, Swaraj Engines, NRB Bearings, etc.|
|Cement and Construction||Ramco Cements, NCC, Mangalam Cements, ITD Cementation, etc.|
|Banking and Financial Services||Cholamandalam, Shriram City, Federal Bank, Equitas Holding, M&M Financial, Repco Home, Shriram Transport, RBL Bank, Westlife Development, Summit Securities, etc.|
|Chemicals||PI Industries, UPL, Sharda Crop Sciences, Clariant Chemicals, Bayer CropSciences, etc.|
|Others||Manpasand Bever, Brittania, Sheela Foam, Greenply Industries, CARE, UFO Movies, VIP Industries, Mahindra Holidays, Narayana Hrudaya, IGL, TVS Motors, Emami, Navkar Corporation, Mold-Tek Pack, etc.|
|Non-Equity||Derivative positions, cash/bank balance, CBLO, etc.|
*The above list is illustrative and subject to periodic change based on SEBI guidelines as well as the requirements of the fund house.
About Midcap Funds
These mutual funds as the name suggests are focused on equity investments and equity derivatives of companies considered to be in the midcap range. Midcap companies are smaller in valuation and market capitalization as compared to large cap or blue chip companies, however, they have a significantly higher opportunity to expand with the passage of time. This provides this class of mutual funds with a high potential for growth in the medium to long term, however, this does come with an additional degree of risk including risk to the principal amount invested.
Investing in SBI Magnum Midcap Fund through Paisabazaar.com
Paisabazaar.com is a single stop destination for investors seeking to invest in mutual funds through a third party brokerage. Even though the Paisabazaar.com online investment platform operates as a 3rd party intermediary between the investor and the fund house, we do not charge any fees in lieu of brokerage or portfolio management activities. All a prospective investor needs to do in order to avail the Paisabazaar.com investor services is to sign up for a free investment account and complete the Aadhar-based eKYC verification as per SEBI mandate. Once the eKYC verification is completed, the investor can log into his/her Paisabazaar investment account and start investing in minutes.
The platform is easy to use such that even the most novice investors can start investing in the mutual fund of their choice without having to know in depth details regarding the fund. This platform allows the investor to compare various choices among funds available from leading fund houses operating in India as well as different funds from the same fund house. The investor can thus compare the returns offered by various funds available from SBI Mutual Funds AMC including the SBI Magnum Midcap Fund. An investor can compare various mutual funds based on key criteria including minimum investment amount; ROI over 1, 3 and 5-year periods; risk category and more. The online investment process can be completed by making a payment using Netbanking of the registered bank or an ECS mandate. Once the units are allotted as per the applicable NAV, they are added to the investor’s Paisabazaar.com online portfolio.