Kotak Small Cap Fund Review 2025: Is It Worth Investing?
Did you know that last year, the Nifty Small Cap (250 TRI) Index gave 7.69% returns and small cap mutual funds in the category have seen returns between 5.90% and 12.34%?
Amidst this, the Kotak Small Cap Fund beat both, delivering a 23.29% average return in 3 years and 20.98% returns in 5 years.
The scheme was launched on the 24th of February, 2005 and has been a source of attraction for many investors on the grounds of its consistent performance and delivering high returns, giving a quick way to build long-term capital for investors just like you.
This post will give you an expert's take on the Kotak small cap fund review 2025 and help you decide whether this small cap fund is worth investing.
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Let’s start by decoding its investment pattern that has made it a standout performer amongst its peers.
Kotak Small Cap Fund Investing Strategy
The Kotak Mutual Fund supports the "Spot them young and watch them grow" investment philosophy, which means it spots potential small cap companies at their early stage by using the GARP investment strategy (Growth at a reasonable price) approach, combining value and growth style of investing to "buy & hold" such fundamentally strong companies at a discounted value.
This strategy speaks to its capability for long-term capital appreciation for you, holding 70-75 stocks with a low turnover ratio of 9%, reflecting long-term conviction, suggesting the fund manager is highly confident in picking quality stocks and will hold them for long-term returns.
Well, talks can only take you so far; it is time to see some real numbers. The next heading will give the performance review of this small cap fund.
What is the Rolling Return of Kotak Small Cap Fund?
Let us now compare the rolling returns of Kotak Small Cap Fund versus the small cap funds benchmark. The graph below shows the 3 year rolling returns comparison of Kotak Small Cap Fund versus the average 3 year rolling returns of the Small Cap Mutual Funds category:
The scheme outperformed the benchmark, giving 23.29% returns in 3 years against 19.44% and similarly delivering 20.98% returns in the last 5 years, again beating its benchmark of 14.35% with good margins.
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Questions like "Is it good to invest in small cap funds?" often float around in the financial world.
This leads you towards the next heading, which tells whether investing in the Kotak small cap fund is worth it or not.
Is Kotak Small Cap Fund Good?
One solid fundamental to know whether a small cap fund is a good investment or not is to check the quality of stocks it invests.
We have evaluated the quality of Kotak Small Cap Fund on several financial metrics of small cap funds: sales growth, earnings growth, cash flow and Price-to-earnings ratio (PE Valuations).
Let us check what the quality of Kotak small cap MF looks like:
| Fundamental Ratios | Values |
|---|---|
| Sales Growth | 9.12% |
| Earnings Growth | 16.27% |
| Cash Flow | 9.21% |
| PE- Valuations | 26.80% |
The Kotak Small Cap Fund has good growth potential, with higher Kotak fund’s earnings growth of 16.27% and cash flow growth of 9.21% against the category average of 5.37%, compared to other similar Mutual Funds, showing that the companies it invests in are making money and are financially strong.
However, the fund’s higher P/E ratio of 26.80% means the stocks are more expensive, so if the expected growth does not happen, there could be chances of higher risk.
Also, its sales growth is a bit slower than the average, which could limit future growth. Overall, the fund focuses on solid small companies with strong financials but it comes with higher prices and some growth challenges.
Recalling a famous saying by Warren Buffett, "Buy Quality at low prices", it sure looks like a quality worthy investment.
Market Cap Allocation of Kotak Small Cap Fund
The Kotak small cap fund portfolio mostly invests in mid-sized companies of 50.47%, which have the potential for good growth. It also has a good chunk of money in small companies of 38%, which can grow quickly but are riskier. Only a small portion, 11.53%, is invested in large companies, which are usually safer but grow more slowly.
This shows the fund is focused on getting higher growth by investing more in smaller and mid-sized companies while keeping some stability with large companies.
What is the Sector Allocation of Kotak Small Cap Fund?
By looking at the below chart, you can see that Kotak small cap fund portfolio is heavily invested 25.7% in Industrials , 25.5% in Healthcare and 22.9% in Consumer Discretionary because these areas are expected to benefit from India's expanding economy, with more spending on infrastructure, healthcare and consumer goods.
The fund also keeps a bit of its money in Technology, though less than the average fund, to avoid some of the risks that come with that sector.
Let's see some real numbers with the help of a pie chart given below:
This fund is focused on sectors that have the potential for growth while also providing some stability.
Overall, the fund aims to take advantage of India's growth while still offering some protection through stable industries like healthcare.
Who is the Manager of Kotak Small Cap Fund?
It's time to talk about the excellence behind this small cap fund's stellar performance. Meet Mr Harish Bihani, who has been managing this fund since October 20th, 2023, with a total experience of 15+ years in handling equity investments.
Mr Bihani has previously worked with reputed AMCs like ICICI Prudential & SBI Mutual Fund and has a unique style when it comes to investing. He focuses on picking quality small-cap companies that can give long-term compounding returns, also leveraging the bottom-up research that has led this fund here today.
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Checking Kotak Small Cap Fund Suitability
The following points will help you know if you should invest in this small cap fund or not:
- Good for Long-Term Investors: This fund works best for people who are planning to invest in the long run and can handle some ups and downs in the market.
- High Growth Potential: It invests in mid and small companies that have the potential to grow quickly but they can be riskier than large companies.
- For Risk-Tolerant Investors: If you are okay with some market bumps and have the patience to wait for growth, this fund might be a good choice.
- Looking for Quality Investments: The fund picks strong, promising small companies and holds them for the long term to help your money grow over time.
- Great for Growth-Seeking Investors: If you want to grow your money over time by investing in smaller, high-potential companies, this fund could be a good option.
To Conclude Kotak Small Cap Fund Review 2025
Recapping in short, the Kotak small cap fund review 2025 says that it would be a worthwhile investment for this new financial year. Although it comes with a high risk, that's what makes it interesting, as "Higher risk equals higher rewards."
Are you still hesitating due to small cap fund volatility? The next best thing you can do is invest via SIP (Systematic Investment Plan) and gain extra points by keeping the investment span for at least 5-7 years.
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