Motilal Oswal NFO: A Simple Way to Invest in Large, Mid, and Small Caps

Motilal Oswal Mutual Fund has announced the launch of a new scheme called the Motilal Oswal Diversified Equity Flexicap Passive Fund of Funds.

If you find it difficult to decide whether to invest in big companies (Large Cap), growing companies (Mid Cap), or emerging companies (Small Cap), this new fund aims to solve that confusion.

The New Fund Offer (NFO) is currently open for subscription and will close on January 15, 2026.

Here is a simple breakdown of how this fund works and what makes its strategy unique.

What is this Fund?

Let’s break down the name to understand the product:

1. Fund of Funds (FoF): This scheme does not buy stocks directly. Instead, it invests in other mutual funds (specifically ETFs and Index Funds). Think of it as a "basket that holds other baskets."
2. Passive: It invests in passive funds (Index Funds/ETFs) that track the market, rather than relying on a fund manager to pick individual stocks.
3. Flexicap: It invests across all market categories, Large, Mid, and Small caps.

The Problem: Predicting the Winner

In the stock market, winners keep changing. In some years, Small Cap stocks give the highest returns. In other years, Large Cap stocks provide safety and stability.

For a normal investor, it is very hard to predict which segment will perform best next year. Often, investors chase past performance (buying what has already gone up) and end up losing money.

The Solution: The "Equal Split" Strategy

This fund adopts a very simple, disciplined rule to solve the prediction problem. It divides your money equally into three parts:

• 33.3% in Large Cap (Established Leaders)
• 33.3% in Mid Cap (Emerging Businesses)
• 33.3% in Small Cap (High Growth Potential)

By doing this, the fund ensures you have exposure to the entire market, avoiding the bias towards just large companies that is often seen in other Flexicap funds.

The "Buy Low, Sell High" Mechanism

The fund has a smart feature called Rebalancing.

The fund managers review the portfolio every quarter. If one segment performs very well and its weight increases significantly (deviates by ±5% from the target), the fund automatically sells some of the profit from that segment and buys the underperforming segment.

Example:
If Small Caps rally and become 40% of the portfolio, the fund will sell some Small Cap units (booking profits) and buy more Large or Mid Caps (buying low). This enforces discipline without you having to do anything.

Key NFO Details

• NFO Closing Date: January 15, 2026
• Benchmark: Nifty 500 Total Return Index
• Minimum Investment: ₹500 (and multiples of ₹1 thereafter)
• Fund Managers: Mr. Swapnil Mayekar (Equity) and Mr. Rakesh Shetty (Debt)
• Exit Load: 1% if you redeem within 15 days of allotment. Nil after 15 days.

Who Is This Fund For?

According to the fund house, this product is suitable for investors who:

1. Are looking for long-term capital growth.
2. Want a diversified portfolio that covers the entire Indian stock market (Large, Mid, and Small).
3. Prefer a passive investment style that removes the risk of human bias in stock selection.

Conclusion

The Motilal Oswal Diversified Equity Flexicap Passive Fund of Funds offers a structured way to invest in the Indian equity market. By removing the guesswork of "which market cap to pick," it aims to provide a balanced investment experience through a transparent and disciplined framework.

Disclaimer: The content is meant for education and general information purposes only.  Past performance is not indicative of future returns. Mutual Funds are non-exchange traded products, and INDstocks is merely acting as a mutual fund distributor. All disputes with respect to distribution activity, would not have access to the exchange investor redressal forum or arbitration mechanism. Mutual Fund investments are subject to market risks, read all scheme related documents carefully before investing. INDstocks Private Limited (formerly known as INDmoney Private Limited) 616, Level 6, Suncity Success Tower, Sector 65, Gurugram, 122005, SEBI Stock Broking Registration No: INZ000305337, Trading and Clearing Member of NSE (90267, M70042) and BSE, BSE StarMF (6779), AMFI Registration No: ARN-254564, SEBI Depository Participant Reg. No. IN-DP-690-2022, Depository Participant ID: CDSL 12095500, Research Analyst Registration No. INH000018948 BSE RA Enlistment No. 6428.