Kotak Mutual Fund lifted the restriction on investment in its small-cap fund after four months as the fund house saw earnings growth in this sector.
“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.
The fund house believes that earnings growth of small-caps is expected to improve, and companies are poised for robust earnings growth.
As the economy continues to expand, smaller businesses are well-positioned to benefit, potentially supporting their valuations, it said.
flows capped
Kotak MF added that while small caps have performed well in the past, it is important to set realistic expectations. The returns seen recently are unlikely to continue at the same pace and may become more normalised.
Hence, avoid the temptation to over-allocate based on the recent performance, it added.
Kotak MF restricted flows into its small-cap scheme from March 4, joining Nippon MF and Tata MF in limiting investments. Fund managers found it challenging to handle continuous flows amid elevated valuations.
In February, the fund house said in a notice that fresh subscriptions through lump-sums will be restricted for each investor to ₹2 lakh per month. Investments through systematic investment plans were also capped at ₹25,000 for each investor per month.
Inflows into the small-cap funds itself have slowed down in the last few months due to huge volatility and sudden fall in stock prices. Investment in small-cap funds have fallen 28 per cent in May to ₹2,725 crore against ₹3,777 crore logged in January.
