Citing stability in the category post the general elections, Kotak Mutual Fund has lifted investment restrictions on its smallcap fund. The fund house said that investors can put in a maximum of INR 2 lakh as lump sum each month and another Rs. 25,000 per month through the Systematic Investment Plan (SIP) route. 

Speaking of the restrictions, it was placed amid a sharp run up in smallcap stock prices and a strong flow of fresh investments into them.

Furthermore, concerns over valuations and liquidity had forced several fund houses, which include ICICI Prudential, Tata and Nippon India. This was done to limit inflows into smallcaps over the past 12-15 months.

Additionally, Kotak MF has stated that the earnings growth of smallcaps is expected to improve going forward. Kotak MF said in an email to its investors, “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.” 

The fund house had further added, “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 normalized. Hence, avoid the temptation to over-allocate based on the recent performance.”