Parag Parikh mutual fund had recently announced in January
2022 that it would not be accepting fresh lumpsum or fresh sip registrations in
Parag Parikh Flexi Cap fund from February 2, 2022.
It has now decided to reopen the scheme from 15th March 2022 considering there is no clarity yet with regards to the increasing of the limit.
What is Parag Parikh Flexi Cap Fund?
Parag Parikh Flexi Cap Fund as the name suggests is a flexi
cap fund.
A flexi cap fund by mandate requires a minimum of 65%
investment in to equity at all times.
It is considered an equity fund for taxation purposes and
accordingly taxed.
A flexi cap fund has no restriction with respect to market
caps or sectors, it is the most flexible of all equity funds because of this
reason.
Parag Parikh Flexi Cap fund along with the domestic
market, also invests up to 35% of its
total corpus into foreign stocks.
It has a focused approach despite not being a focused fund
with the number of holdings .
Can the limit be raised?
Yes and most likely it will be soon.
The exact date and the confirmation of the same have to yet
be confirmed though.
At the moment though, markets worldwide are going through a
very volatile phase.
This is on account of the Russia-Ukraine conflict, rising
crude oil prices and inflation.
The Indian Rupee too is not faring any better.
All these factors have meant a volatile market which in turn
means a good opportunity to invest in a falling market without needing to time
the market.
The above factors along with no clarity regarding the
raising of the limit have led to the fund being reopened.
How will this new change affect
your investments?
Parag Parikh Flexi Cap needs a minimum of 65% into domestic
equity at all times.
This is so the fund can qualify as an equity fund for taxation
purposes which is more favourable than it is for debt funds.
International mutual fund schemes are considered as debt
funds for taxation purpose.
On top of this it also invests in foreign equities, mostly
US based IT companies.
Now the fund cannot invest in foreign equities till the
limit is raised, therefore whatever amount the fund gets in the meantime will
have to be allocated to domestic equity.
This will bring down the overall exposure to foreign equity
in the portfolio.
Therefore those investing to avail international exposure
will be left disappointed till the limit is not raised.
"As of now we have no visibility on if / when and
by how much the limit for overseas investments will be revised. If and when the
limits are increased and if it is of a relatively small amount, the same will
get exhausted soon. In such a scenario, having funds readily available will be
advantageous rather than opening the scheme after the limit increase only to
see the industry wide cap get breached again,"
"It is expected that over time, the weightage of
foreign stocks in Parag Parikh Flexi Cap Fund will come down. As and when
overseas investment limits are increased, we will rebalance the portfolio as
per the then prevailing situation and valuations,"
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