2024-02-29 06:06:10
New Delhi: Kotak Mahindra Mutual Fund on Monday restricted lump sum investments in its small cap funds. Kotak Mahindra Asset Management Company said it has temporarily limited the switch-in as well as subscription of units in Kotak Small Cap Fund from March 4, 2024. According to the company, their move is aimed at protecting the interests of existing unitholders and making incremental investments appropriately given the recent surge in smallcaps. AMC has limited new subscription to the scheme through lump sum investment including additional investment or switch-in to Rs 2 lakh per PAN per month. Apart from this, there is a limit of Rs 25,000 per PAN in SIP, STP and other such products. Before Kotak AMC, SBI MF had also suspended lump sum investment in small cap funds. After this, Nippon India Life Asset Management and Tata Mutual Fund also announced that it is deciding to stop accepting lump sum amount and switch-in investments in small caps. Experts say that one after the other fund houses closing the doors for lump sum investment in smallcap focused schemes is an indication that these are no longer a safe haven for investors.
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What is the reason?
Ashish Soumayya, CEO of White Oak Capital Management, says, ‘Fund houses take these decisions in the interest of investors. In the last two years, small caps have given huge returns and now it is being discussed that these stocks have also become quite expensive. It is now doubtful whether they get similar returns after one size. There are 250 stocks in small cap and 150 in mid cap and their size is also limited. If a lot of money comes in, the fund house will invest it in selected stocks only. In such a situation, the fund house has to make restrictions considering the market level.
Is return a problem?
Dhirendra Kumar, CEO, Value Research, says smallcap stocks are more volatile than their largecap counterparts. Therefore it is important to have a long term view in this. Mid cap-small cap funds have given 40-45 percent returns in 2023. The speed at which money is coming in after this strong performance is worrying.
What is fear?
Regulator SEBI has also expressed concern over excessive investment by retail investors in smallcap stocks and funds. Experts say that if there is volatility, huge withdrawals may occur. Mid-small cap stocks do not enjoy healthy trading volumes on the exchange. Their trading volume had fallen drastically during the time of Covid.
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What do the figures say?
According to Samco Mutual Fund data, the asset under management (AUM) of small-cap schemes reached a record Rs 2.48 lakh crore in January 2024. In January it was about 83% of the large-cap scheme category’s AUM of Rs 2.99 lakh crore, while in August 2021 it was 44%.