Kotak MF is the first to remove restrictions on small-cap fund investments after elections and earnings growth

Kotak Small Cap Fund by Kotak Mahindra Mutual Fund started accepting lump sum investments again on Tuesday, following a four-month pause, due to better investment conditions post Lok Sabha elections and quicker corporate earnings growth.

The fund announced on its website that new subscriptions in Kotak Small Cap Fund can be made through various investment options starting from July 2.

Kotak is the initial entity to lift the restrictions implemented starting March 4. Besides Kotak, small-cap funds from Tatas, ICICI Prudential, and Nippon also ceased accepting new investments due to worries about overvalued small-cap stocks following a significant increase in prices and limited investment options.

"Many small-cap funds stopped accepting new investments due to limited investment options, primarily because of high valuations." Nirav Karkera, head of research at Fisdom, stated that in the past, the general election was a crucial factor that the overall macro economy was very responsive to, in addition to other macro events. The most recent earnings report and growing confidence in overall economic conditions have further reinforced the investment potential of various sectors within the small-cap market.