Smallcases
smallcases are a professionally-managed modern financial product which offer portfolio diversification similar to mutual funds while giving investors ownership of the underlying securities. At present, these portfolios comprise only of stocks and Exchange-traded funds (ETF) on the National Stock Exchange of India. It is available for retail investors on leading Indian brokers such as Axis Direct, Edelweiss, HDFC Securities, Kotak Securities, Zerodha and 5paisa. [1][2][3]
smallcases are digital-only, with the technology platform powering the product built and operated by Bangalore-based smallcase Technologies.
About the product
A smallcase is a basket of stocks or ETFs created based on a theme or strategy. As such, these securities are deposited in the Demat account giving investors ownership, unlike mutual funds which issue units. [4]
Since these portfolios comprise equity products, they are regulated by the Securities and Exchanges Board of India which only permit professionals or firms registered with it as Research Analysts or Investment Advisors to create and manage. While mutual funds have a fund manager actively managing portfolios, smallcases are passively managed with portfolios rebalanced at pre-decided intervals. [5][6]
smallcases portfolios can be classified into categories based on the method of construction. [7][8]
- Thematic: Originating from ideas, themes or trends such as Electric Vehicle adoption or government schemes such as Smart Cities Mission
- Model-based: Built using strategies such as Value Investing propagated by Benjamin Graham and popularized by Warren Buffett. Other strategies such as Magic Formula investing, CAN SLIM have been adapted for the Indian market
- Sectoral: Portfolios constructed to track specific sectors such as Information Technology, Banking, Energy, Pharma etc
- Asset Allocation: These portfolios feature diversification across asset classes such as Equity, Gold or Fixed Income using Exchange-traded funds
- Smart Beta: Investment portfolios comprising blue-chip stocks using Smart Beta strategies
Fees
Investors do not pay any management fees or expense ratios, paying only when they transact. Fees vary according to the broker and may include a flat fee for transacting in a smallcase apart from standard brokerage charges.
Current Adoption
A relatively new financial product, smallcases were first available in 2016 through India's largest broker, Zerodha. [9] Since August 2018 other leading Indian brokerages including Kotak Securities, HDFC Securities, Axis Direct, Edelweiss and 5paisa have added it to their offerings alongside traditional products such as stocks, mutual funds, IPOs, Futures and Options and commodities. [10][11] To date, over INR 2,000 crore ($280 million) in smallcases have been transacted with the total number of investors exceeding 250,000. [12]
References
- ↑ "March of ideas: Broking firms line up thematic play". DNA India. 2018-07-24. Retrieved 2019-05-12.
- ↑ Dhanorkar, Sanket (2019-03-25). "What is Smallcase? Should you invest in stocks via these?". The Economic Times. Retrieved 2019-05-12.
- ↑ "Explainer | What is smallcase and how to invest using the platform?". Moneycontrol. Retrieved 2019-05-13.
- ↑ Barbora, Lisa Pallavi (2016-12-22). "Pre-fab portfolios for investors with a view". https://www.livemint.com. Retrieved 2019-05-13. External link in
|website=(help) - ↑ "SEBI | SEBI(Research Analysts) Regulations, 2014". www.sebi.gov.in. Retrieved 2019-05-13.
- ↑ "SEBI | SEBI (Investment Advisers) Regulations 2013 [Last amended on December 08, 2016]". www.sebi.gov.in. Retrieved 2019-05-13.
- ↑ "smallcase: The theme of things". Forbes India. Retrieved 2019-05-13.
- ↑ Alvares, Clifford. "A Portfolio-Based Approach Reduces The Risk Of Equity Investments". BW Businessworld. Retrieved 2019-05-13.
- ↑ Mahesh, Prashant (2016-07-13). "Smallcase, backed by Zerodha launches thematic investing for concentrated bets". The Economic Times. Retrieved 2019-05-13.
- ↑ "Kotak Sec, smallcase Tech ink deal". @businessline. Retrieved 2019-05-13.
- ↑ Bhakta, Pratik (2019-02-05). "5paisa partners with Smallcase Technologies". The Economic Times. Retrieved 2019-05-13.
- ↑ "Tech platform smallcase raises $8 mn in Series A Funding from Sequoia India". Moneycontrol. Retrieved 2019-05-13.
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