Kotak Mutual Fund lifts investment restrictions in its smallcap fund

Kotak Mutual Fund has lifted investment restrictions on its smallcap fund, citing stability in the category post the general elections.

On February 26, the fund house had said that investors can put in a maximum of Rs 2 lakh as lump sum each month and Rs 25,000 per month through the systematic investment plan (SIP) route. These restrictions were placed amid a sharp run up in smallcap stock prices and strong flow of fresh investments into them.

Concerns over valuations and liquidity had forced several fund houses, including ICICI Prudential, Tata and Nippon India, to limit inflows into smallcaps over the past 12-15 months.

Kotak MF said the earnings growth of smallcaps is expected to improve.

“We believe that earnings growth of smallcaps is expected to improve, and companies are poised for robust growth. As the economy continues to expand, smaller businesses are well-positioned to benefit, potentially supporting their valuations,” it said in an email to investors.

“While smallcaps have performed well in the past, it's 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,” the fund house added.

(Disclaimer: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt Ltd)