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Kotak Mutual Fund recently announced restrictions on investments in their small-cap fund, effective March 4, 2024. This decision comes after similar moves by other fund houses like Nippon India MF and Tata Mutual Fund.
The small-cap segment has witnessed significant growth in recent times. This rapid rise in valuations might not be sustainable in the long run. The fund house considers upcoming elections in various countries to be potential factors that could introduce volatility in the market.
[Read: Can Small Cap Funds Deliver Big Returns Going Forward?]
Limiting new investments helps ensure the fund manager can effectively manage the portfolio within its current capacity, potentially benefiting existing unitholders. The restrictions help the fund manager control the cash flow and maintain an appropriate asset allocation strategy.
Kotak Mahindra Mutual Fund in its recent notice cum addendum dated February 26, 2024, has announced a temporary limit on the subscription of units in Kotak Small Cap Fund, effective from March 4, 2024, until further notice.
The fund house said, this move is aimed at safeguarding the interests of current unitholders and to ensure that incremental investments are made appropriately due to the recent significant surge in small-caps.
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Fresh subscription through lumpsum investment (Including Additional investment/Switch in) in the scheme will be restricted to Rs 2,00,000 per PAN (first holder/Guardian) per Month.
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Fresh registrations through Systematic Investment Plan (SIP) or Systematic Transfer Plan (STP) or such other special products shall continue with a limit of Rs. 25,000 per PAN (first holder/Guardian) per month for daily, weekly, monthly and quarterly frequencies.
The Limits for various frequencies will be as under:
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- Daily SIP/ STP-in: Rs. 1,250/-
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- Weekly SIP/ STP-in: Rs.6,250/-
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- Monthly SIP/ STP-in: Rs.25,000/-
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- Quarterly SIP/ STP-in: Rs.75,000/-
There would be no limit on the number of applications through SIP / STP-in. An investor can give multiple applications for SIP/ STP-in in the Scheme, provided the total investment amount irrespective of frequency of all applications received on or after the effective date is less than or equal to Rs.25,000/per month per PAN (first holder/ guardian PAN).
All other terms and conditions as provided in the Scheme Information Document (SID)/Key Information Memorandum (KIM) of the applicable schemes shall remain unchanged.