Kotak Mutual Fund Restarts Small Cap Fund Investments

Kotak Mutual Fund has lifted the restriction on investments in its small-cap fund after a four-month hiatus, citing growth in earnings within this sector.

Stability After Elections

“Starting July 2, we will resume accepting subscriptions for units in the Kotak Small Cap Fund. The political uncertainties around India’s elections are now behind us, reducing market volatility and creating a more stable environment for small-cap stocks,” announced Kotak Mutual Fund.

Optimistic Earnings Growth

The fund house is optimistic about the earnings growth of small-caps, anticipating robust performance from these companies. With the economy expanding, smaller businesses are well-positioned to benefit, potentially supporting their valuations.

Realistic Expectations

While small caps have performed well recently, Kotak MF advises setting realistic expectations. The fund house cautions that the high returns seen in the past are unlikely to continue at the same pace and may become more normalized. Investors should avoid the temptation to over-allocate based on recent performance.

Previous Investment Restrictions

In March, Kotak Mutual Fund (MF) restricted flows into its small-cap scheme, following the lead of Nippon MF and Tata MF, due to challenges in managing continuous inflows amid elevated valuations. In a notice issued in February, the fund house announced that fresh lump-sum subscriptions would be limited to Rs 2 lakh per investor per month, while systematic investment plans were capped at Rs 25,000 per investor per month.

Market Volatility Impact

Over the past few months, inflows into small-cap funds have slowed due to market volatility and sudden drops in stock prices. Investments in small-cap funds decreased by 28% in May to Rs 2,725 crore from Rs 3,777 crore in January. The BSE Small-cap index dropped 6% to 43,166 points in March from 45,722 points in January but has since rebounded, reaching 52,988 points on Tuesday.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions