Kotak Small Cap Fund Direct Growth

Kotak Small Cap Direct Fund is a small-cap mutual fund that invests at least 65% of its assets in equity and equity-related instruments of small-cap companies. SEBI defines small-cap companies as those that rank 251st and beyond on the stock exchange as per their market capitalization. 

The fund follows Nifty Small Cap 250 TRI as its benchmark index. This helps them realistically measure a fund’s performance against its benchmark. Small-cap companies are often under-owned and under-researched, which makes them potentially high-growth. 

Investment Strategy

Kotak Small Cap fund’s portfolio is built using a bottom-up stock selection process. This includes looking at individual stocks from a micro-level and identifying companies that are leaders in their respective sectors. 

They have high cash flows and are reasonably valued. The fund is currently overweight on domestic businesses, especially in sectors like consumer durables, capital goods, healthcare, and auto & auto ancillaries.

Taxation on Kotak Small Cap Fund

Tax on your gains from the Kotak Small Cap Fund depends on how long you have held the fund for. All equity mutual funds sold within 12 months are considered Short-term Capital Gain (STCG) and investments sold after 12 months are considered Long-term Capital Gain (LTCG). The taxes are as follows:

• Long-term Capital Gain: Exemption of up to ₹1,25,000 and then 12.5%
• Short-term Capital Gain: 20% 

Who Invests in Kotak Small Cap Fund? 

The fund is best suited for investors who have a long-term investment horizon and are willing to invest in high-risk, high-growth companies. Since small-cap funds can be highly volatile in economic cycles, investors need to have a high-risk appetite to invest in this fund.

Allocation & Historical Returns

Currently, the fund's portfolio comprises 73.4% small-cap stocks, 4.83% large-cap stocks, and 16.38% mid-cap stocks.

With an AUM of ₹17329.0 crores, Kotak Small Cap Fund Direct Growth generated a return of 2.0% in 1 year, 22.7% in 3 years, 35.4% in 5 years. while its benchmark index (Nifty Smallcap 250) generated 2.2% in 1 year, 28.2% in 3 years, and 34.8% in 5 years.