Kotak Mahindra Mutual Fund has become the latest Asset Management Company (AMC) to restrict investments into its small cap fund. The restriction will apply from March 4, 2024.
In a notice to investors today (February 26), Kotak Mahindra AMC said it has temporarily limited the subscription of units, including switch-ins, into Kotak Small Cap Fund. The restrictions will be effective from March 4, 2024, media reports said.
With this move, the AMC is aiming to safeguard the interests of current unit holders. It further aims to ensure incremental investments are made appropriately amid recent surge in small-caps.
As per the notice, strong momentum in some small and midcap stocks has taken them beyond the fair value of business. Further, momentum chasing by investors in some small cap stocks, coupled with limited free float available in the market, has created valuation distortions in a few cases.
The AMC will review the decision to restrict investments in the second quarter of the calendar year.
What is the new investment limit into Kotak Small Cap Fund?
Fresh lump sum investments into Kotak Mahindra Small Cap Fund has been restricted to Rs 2 lakh per PAN per month. Fresh SIP or STEM (systematic transfer-in plan) will be restricted to Rs 25,000 per PAN per month for daily, weekly, monthly and quarterly frequencies.
The daily SIP/STM limit will be Rs 1250; weekly SIP/STP limit will be Rs 6250 and monthly SIP/STP limit will be Rs 25,000/month. For quarterly SIP/STPs, the limit will be Rs 75,000 per quarter per PAN.
However, there is no limit on the number of applications through SIP/STP. If you plan to invest in Kotak Mahindra Small Cap Fund, you would be able to submit multiple applications provided the sum of all investments is not over Rs 25,000 per month per PAN.
SIPs/STPs registered under this scheme will not have facilities like top-up, flex SIP, smart SIP, smart STP, transfer-in of income distribution cum capital withdrawal plan etc.
Investors will not be able to register semi-annual and annual frequency SIPs in this small cap scheme.
Also Read: How is income from Mutual Funds taxed in 2024?
Will it affect old SIPs into Kotak Small Cap Fund?
However, new restriction will not affect SIP or STP of such other special product registered prior to the effective date. The AMC said that restrictions will also not affect unitholders under Dividend Reinvestment Options.
The restrictions will also not have any impact on redemption/switch out. It will also have no impact on special products like Systematic Withdrawal Plan (SWP), SIP pause facility etc.
The restrictions will also not be applicable to intra-scheme switches.
Disclaimer: The above content is for informational purposes only. Please consult a SEBI-registered investment advisor before investing in any mutual fund scheme.
