Kotak Small Cap Fund – Direct-Growth: Key Insights, Returns, Risks, and More

Small-cap funds have been gaining long-due popularity in recent years due to the increase in financial literacy rates, and people willing to take higher risks to earn higher returns. Having said that if investors are willing to take calculated risks while willing to earn higher returns can consider Kotak small cap fund direct growth. 

This article will revolve around the details of the Kotak Small Cap Fund. You will read all the insights about this fund, starting from its returns to the risk involved, different financial metrics you can evaluate from here, and more.

Fund Management and Objectives

Kotak Small Cap Fund Direct-Growth was launched in the year 2013 in the month of January and since then it has offered a return of over 20%. This scheme’s investment objective is to appreciate capital and build a corpus over long-term and during the tenure, there will be various ups and downs which the investors have to go through. 

Kotak Small Cap Fund Direct-Growth is managed by – 

• Harish Bihani: He has been managing the fund since 23 October 2023. Mr. Bihani has extensive experience in the field of fund management, and he was associated with multiple reputed AMCs in the past including ICICI Prudential Mutual Fund, CIMB Securities, Indiabulls Securities, SBI Mutual Fund, and more. Mr. Bihani did an MBA in Finance and currently managing other two funds as well which are Kotak Business Cycle Fund and Kotak Pioneer Fund. 

Excited about investing in the Kotak Small Cap Fund? Open a free Demat account today!

How Does the Kotak Small Cap Fund Work?

The Kotak Small Cap Fund invests predominantly in small-cap companies, which means it invests in companies ranked 251st onward according to market capitalization. The fund manager/s picks the most promising stocks and adds them to the fund portfolio to generate long-term returns. It invests in the equity and equity-related instruments of the small-cap companies. 

However, as small-cap companies are highly volatile, the fund manager has to keep an eye on the fund always and they can allocate the asset accordingly if they feel the market is becoming highly volatile and small-cap stocks can fall. 

Performance and Returns (As of 10 Feb 2025) 

Kotak Small Cap Fund Direct-Growth has been performing consistently well over the years except for the past few months, when the market volatility has taken over its performance, and pulled the fund valuation down. However, the long-term returns look promising. Here is a snapshot of the returns – 

Time Frame	Kotak Small Cap Fund Direct-Growth (%)	Category Average (%)
Since Inception	20.40	NA
6 Month	-7.75	-7.73
3 Month	-10.25	-10.15
1 Month	-6.59	-6.32
1 Day	-1.96	-2.12
YTD	-9.70	-10.76
1 Year	13.10	8.57
3 Year	15.79	18.71
5 Year	26.87	27.50
7 Year	19.08	16.63
10 Year	18.97	17.63

As you can see in the table above, the fund has been performing well compared to the category average, especially in the long term.  

Investment Allocation (As of 31 Dec 2025)

The Kotak Small Cap Fund Growth has 96.34% of its assets invested in equity and equity-related instruments while 3.66% invested in cash and cash equivalent. 

Market cap-wise asset allocation 

• Giant cap – 2.18%
• Large Cap – 8%
• Mid-cap – 56%
• Small-cap – 33.82%

As of 31 December, the fund had an average market cap of ₹19170 crore and it spans

across 75 stocks where the top 10 stocks make up 27.77% of its assets. 

Sectoral Allocation 

The fund invests across sectors offering a well-diversified portfolio, here are the top five sectors as of 31 December 2024 – 

Sectors	Allocation (%)
Industries	25.92
Consumer discretionary	19.88
Materials	16.98
Healthcare	16.22
Technology	5.41

Stock-wise Allocation 

The top five stocks of the Kotak Small-cap Fund include – 

Stock	Assets (%)
Cyient	3.28
Techno Electric & Engineering	3.15
Blue Star	3.03
Vijaya Diagnostic	2.76
Aster DM Health	2.74

Key Metrics 

As of 31 December 2024, the fund has an expense ratio of 0.51%, which is lower than the category average of 0.65%.

Fund Details	Information
AUM (Assets Under Management)	₹17778 Crore as of 31 December 2024
Category	Equity Fund, open-ended
Fund Manager	Harish Bihani
Exit Load	1% on units above 10% of investments redeemed within 365 days of investment
Entry Load	Nil
Minimum Investment	₹500(Lump sum)₹100 (SIP)
Benchmark	Nifty Smallcap 250 (TRI)

The Kotak Small Cap Fund NAV as of 10 February 2025 stood at ₹289.257. 

Risk and Performance of the Kotak Small Cap Fund 

This fund is classified as a ‘Very High Risk’ fund, which indicates that the fund has the potential for higher returns but there will be high volatility as well. 

1. Standard Deviation (Std Dev %): It shows how much the returns vary from the average returns generated by the funds themselves. The higher this number, the more it fluctuates.

The Standard deviation of the fund is around 14.93% lower than the category average of 16.53% depicting lesser fluctuations. 

2. Beta: This ratio indicates the volatility of the fund’s performance, compared to similar funds in the market. The lower the Beta, the more predictable the returns are, and vice versa. It helps in comparing funds. 

The Kotak Smallcap fund has a beta of 0.74% while the category average is around 0.83 again indicating less volatility. 

3. Sharpe Ratio: This ratio indicates the return you get for the risk you’re taking. A higher number means better risk-adjusted returns.

Currently, this fund has a Sharpe ratio of 0.72%, while that of the category is 0.79%, which indicates that the fund has been offering a bit lower risk-adjusted return. 

4. Sortino Ratio: It is similar to Sharpe but only looks at downside risk (the risk of losing money).

This fund has a higher downside risk compared to its peers. While the average for the category stands at 1.25%, this fund has 1.29% indicating higher downside risk. 

5. Alpha: It measures the extra return the fund gives above the market’s average return.

The fund offers a lower return compared to that of its peers as depicted by its Alpha of 1.61% while the average of the category is 2.70%. 

Taxation for Kotak Small Cap Fund 

If you’re investing in the Kotak Small Cap Fund, here’s how your returns will be taxed:

1. Short-Term Gains – If you sell the fund units within 1 year of the date of investment, a 20% tax will be levied on the entire return generated during the period. 
2. Long-Term Gains – If you sell the fund units after one year, any profit generated over and above ₹ 1.25 lakh will be taxable at a 12.5% rate. The same rate will be applicable for any investment tenure above 1 year. 

So, the longer you hold your investments, the better returns you can expect and the lesser effect of taxes!

3. Taxes on Dividends – Dividends earned if any will be taxable at the hands of investors as per their tax slabs. If the dividend income surpasses Rs. 5000 in a financial year, then the fund house will deduct 10% TDS before disbursing the dividend into the account of the investor. 

Minimum Investment and Lock-in Period

The minimum investment amount in the Kotak Small Cap Fund is ₹500 for lump sum and SIP, it is ₹100. There is no lock-in period for the Kotak Small Cap Fund Direct-Growth.

Invest in the Kotak Small Cap Fund — SIP or lump sum at zero brokerage!

How to Invest in Kotak Small Cap Fund Direct?

You can invest in the Kotak Small Cap Fund – Direct Growth plan with Shoonya. 

Shoonya offers a free Demat account,  Zero brokerage trading, advanced trading tools, 100+ technical indicators, and much more!

Investing in Lump Sum Mutual Funds through the Shoonya Web Platform

Here’s a quick guide on how to invest in lump sum mutual funds through the Shoonya web platform:

1. First, you must log in to your Shoonya account at trade.shoonya.com. From the “Orders” section, click on “MF order.”
2. Search for the fund you wish to invest in; in this case, the Kotak Small Cap Fund – Direct Growth plan.
3. Choose “Fresh” for a new investment and enter the amount you want to invest.
4. You can complete your purchase by clicking the “Purchase” button.
5. You will receive a payment link on your registered email. Use the link to make the payment.

After payment, your mutual fund units will be allotted to your Demat account within T+2 days.

Note: You can only make the payment using the bank account registered with your Demat account.

Setting Up an SIP for Mutual Funds

If you prefer a Systematic Investment Plan (SIP) for Kotak Small Cap Fund Direct Plan-Growth plan, you must follow these steps:

1. First, you need to log in to your Shoonya account at trade.shoonya.com. Go to “Orders” and click on “XSIP.”
2. Find the mutual fund for which you want to set up an SIP. In this case, the Kotak Small Cap Fund – Direct Growth plan.
3. If this is your first SIP with Shoonya, you need to create a Mandate ID. 

For that, you must enter the mandate amount and the validity date (until you want to keep your SIP active).

4. You must submit the details, and you’ll receive a Mandate authentication link via email. Approval generally takes 24 hours.

Once your Mandate is approved, you can follow these steps to set up your SIP:

1. Go to “XSIP,” enter the SIP amount, and select “Fresh” as the transaction type.
2. Choose the date when the SIP will be debited directly from your registered bank.
3. The approved Mandate ID will auto-reflect.
4. Choose “Monthly” for monthly debits and specify the number of installments (e.g., 24 installments for a 2-year SIP).

If you do not want to forget your SIPs and invest systematically, the SIP method can be most suitable for you. 

Why Invest in the Kotak Small Cap Fund?

The reasons for investing in the Kotak Smallcap Fund Direct-Growth can be the fund’s – 

• Wide diversified portfolio which enables the investors to mitigate risk and diversify their portfolio
• The fund has been consistently performing well since its inception
• Helps in capital accumulation 

Suitability of this Fund| Who Should Invest?

The Kotak Small Cap Fund Direct is suitable for investors who:

• Are looking for higher returns and ready to take higher risk 
• Looking for long-term capital appreciation 
• Can stay invested for at least seven years and above
• Can tolerate several ups and downs in the fund

Conclusion

So, if you are interested in small-cap stocks but not sure in which to invest or not able to do the amount of research and analysis required then you can consider this fund, or if you want to invest for the long-term and want to accumulate capital then this fund can be apt. 

Kotak Small Cap Fund Direct Plan-Growth plan | FAQs

Source: ValueResearch

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Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.