Jun 24, 2024 6 min read

Is Kotak Small Cap Fund a Good Investment for 2024?

It is difficult to name only one fund, as the top performers keep changing, yet the Kotak Small Cap Fund is hard to ignore. This stock is among India’s leading Small cap investment choices, known for its consistently amazing performance since its launch in February 2005. This fund stands out for its ability to deliver reliable returns and manage losses effectively, making it a dependable option for small-cap investors.

Let’s find out if this fund will prove to be a valuable addition to your portfolio in 2024 or not.

Stay with us till the end of this post and we will unmask the other hidden gems of the small-cap category with expert review.

New Management of Kotak Small Cap Fund

Meet Mr. Harish Bihani, who took over from Pankaj Tibrewal in December 2023, making some changes while keeping the overall philosophy. Bihani has over 15 years of experience in small-cap investments and a strong research background. Before joining Kotak Mutual Fund, he worked with several firms, including ICICI Prudential Mutual Fund and SBI Mutual Fund.

  Harish Bihani

Mr. Harish Bihani

Now, let’s delve into the investment ideology that has made this fund a consistent performer in the small cap category.

What Investment Approach Has Made Kotak Small Cap Fund a Consistent Performer for the Past 5 Years?

The Kotak Small Cap Fund has consistently performed well over the past five years due to its strategy of focusing on long-term capital growth. It invests in scalable businesses with consistent cash flow and strong leadership. The fund manager prioritizes domestic sectors that are leading the market and companies benefiting from reduced commodity costs, the fund shields its portfolio from global economic fluctuations and valuation risks. This approach helps in maintaining stability while targeting significant growth potential within India's market.

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Well, let’s see if their investment approach has been successful or not by checking its past performance.

What is the Kotak Small Cap Fund's Past Performance Record?

Since its launch in January 2013, the Kotak Small Cap Fund has consistently surpassed its benchmark, the Nifty Small Cap 250 TRI, delivering nearly 24% annualized returns over any 3 years compared to the benchmark's 18.51%. The fund has shown impressive performance over 5 years, outperforming its benchmark 80% of the time, highlighting its ability to achieve superior long-term returns despite occasional dips in shorter timeframes.

 Performance Record

Looking at the stellar performance of the past, one might wonder how the fund has distributed its assets, so let us analyze what its portfolio is made up of.

What’s in the Kotak Small Cap Fund’s Portfolio?

The Kotak Small Cap Fund invests 95.86% in equities and keeps 4.14% in cash to take advantage of market opportunities. Approximately 87% of the portfolio is invested in Small Cap Mutual Funds and mid-cap stocks, with an additional 12.70% in large-cap stocks for stability.

Portfolio 

The fund strategically allocates its assets across various sectors, including Industrials, Consumer Discretionary, Materials, Healthcare, and Technology, setting it apart from its counterparts in the category. It prefers domestic businesses, particularly leaders in their respective sectors, and invests independently of benchmarks. By diversifying across sectors, the fund aims to lower risk and seize growth opportunities across the economy.

How does Kotak Small Cap Fund select and Evaluate Quality Stocks?

As of May 31, 2024, the Kotak Small Cap Fund holds a diverse portfolio of 75 domestic stocks, each constituting less than 4% of the total assets. The fund manager's strategic choices have led to consistent outperformance, despite occasional underperformance due to lower exposure to rallying sectors such as defence, banks, and fertilizers.

Kotak Small Cap Fund select and Evaluate Quality Stocks 

The Kotak Small Cap Fund focuses on quality companies. It looks for small businesses that are growing their sales quickly, making good profits, generating lots of cash, and trading at reasonable prices.

Just look at the fund's top holdings - companies like CYIENT, Carborundum Universal, Techno Electric & Engineering, Blue Star, and Ratnamani Metals. On average, these portfolio companies have:      

Fundamental RatiosValue
Sales Growth 14%
Earnings Growth 28%
Cash Flow 33%
PE - Valuations 26.59%

 

This careful selection of high-quality small companies helps protect the fund from market ups and downs. It’s designed to deliver steady, long-term gains for investors willing to stick with it over time.

All these factors considered we believe that this fund is an excellent choice, comprising top-notch companies with strong growth potential.

How has the Kotak Small Cap Fund's Recent Performance Been?

The Kotak Small Cap Fund has returned 21.70% over the past six months and 42.29% over the past year. In comparison, the NIFTY SMALLCAP 250 TRI benchmark has provided 27.27% over six months and 42.29% over one year. While the fund's performance has been promising, it has underperformed the benchmark in the past year. However, it has outperformed the index over the long term, demonstrating its superior performance overall. Let’s check the performance with the help of a graph:

 Performance Been

While the Kotak Small Cap Fund has recently underperformed compared to its benchmark, its history of consistent returns highlights its strong potential. The fund’s strategic investments and diversified portfolio suggest it can handle market volatility and provide high returns over the long term. This makes it a solid option for investors looking for growth and stability.

Endnote

If you are ready to make high returns in 2024, Kotak Small Cap MF is the best fit. While this fund proved to be a consistent performer, SIP is the smart way to invest in the small cap category. It’s often said that good things come to those who wait therefore keeping an investment horizon for 5-7 years is a common strategy used by many experts.

One-stop of all the hidden gems, discover Which Small Cap Fund is Best in 2024? 

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SBI Small Cap Fund - Regular Plan - Growth 0.44% 9.06% 32.45% 21.9% 23.27% Invest
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