Kotak Mutual Fund restarts small cap fund subscriptions. Check details

Kotak Mutual Fund has reopened subscriptions to its small-cap fund. The decision, which will be activated on Tuesday, comes as a direct response to the improved market conditions subsequent to the resolution of political uncertainties stemming after the Lok Sabha elections. The communication directed at their esteemed clientele underlined the notable decrease in market volatility and the emergence of a more secure atmosphere for small-cap equities. 

“We are resuming the subscription of units in Kotak Small Cap Fund, effective July 2. Political uncertainties around India’s elections are behind us. This has reduced market volatility, making the market more stable for small-cap stocks,” said Kotak Mutual Fund.

"We believe that earnings growth of small caps is expected to improve, and firms are poised for robust earnings growth. The expanding economy is expected to further benefit smaller businesses, supporting their valuations," Kotak MF said.

It is to be noted that Kotak Mahindra Asset Management Company (AMC) announced restrictions on lump-sum investments in its small-cap funds, effective from March 4, 2024, due to a notable increase in small-cap stocks. Almost all the leading fund houses including SBI MF, Nippon MF and Tata MF had limited inflows into their small-cap funds due to sharp run-up in valuations amid unprecedented inflows. 

Kotak MF had said: “We will review this call in the second quarter of this calendar year depending on better clarity emerging on some of these uncertainties or as more opportunities arise with the progression of the economy or valuations becoming more palatable.”   

In its Tuesday communication, the fund house also cautioned investors to maintain realistic expectations.

"Investors are advised to avoid the temptation to over-allocate based on recent performance," the mutual fund house said.

The Nifty Small Cap 250 TRI index has given a return of 66 per cent in the last one year. The Nifty Small Cap 250 TRI index has given a return of 66 per cent in the last one year. 

In February this year, the Association of Mutual Funds in India (AMFI) wrote to mutual fund houses to take measures to protect the interest of investors in small and mid-cap schemes, which have seen heavy inflows in the recent past.

Small and mid-cap funds have seen a surge in inflows from investors led by higher-than-expected performance of companies in these segments. Many analysts have raised concerns over the valuation of small and mid-cap stocks which poses risks for investors.