Kotak Multicap Fund: A Diversified Equity Investment Across Market Capitalizations
Jan 12, 2026
AdvisorAlpha
Introduction: Why Multicap Funds Are Gaining Popularity
In recent years, multicap mutual funds have steadily become a favored choice among Indian investors seeking both growth and diversification in their portfolios. According to the Association of Mutual Funds in India (AMFI), multicap funds witnessed a surge of over 20% in assets under management during the last fiscal year, highlighting the growing investor confidence in this category.
Multicap funds offer exposure across large-cap, mid-cap, and small-cap companies, allowing investors to benefit from a balanced risk and reward profile. This versatility is especially attractive in volatile markets where rigid sector or capitalization bets may underperform.
One fund that stands out in this space is the Kotak Multicap Fund, managed by Kotak Mahindra Asset Management Company. Known for its robust portfolio selection and dynamic asset allocation, this fund appeals to investors looking for long-term capital appreciation without concentrating all their investments in one area.
What Is Kotak Multicap Fund?
The Kotak Multicap Fund is a diversified equity mutual fund designed to invest across different market capitalizations including large-cap, mid-cap, and small-cap stocks. Its primary objective is to generate long-term capital growth by strategically allocating assets across sectors and companies of varying sizes.
Unlike single-cap funds that limit investments to one market capitalization band, Kotak Multicap Fund embraces flexibility. The fund’s portfolio consists of a mix of established blue-chip companies alongside emerging mid and small-cap firms with high growth potential. This approach helps investors enjoy the stability of large caps while capitalizing on the growth opportunities presented by smaller companies.
As of the latest quarterly report, the fund’s portfolio allocation breaks down into approximately 60% large-cap, 25% mid-cap, and 15% small-cap holdings. This aligns with regulatory guidelines while allowing active management discretion based on market conditions. Its investments span sectors such as banking, automobile, technology, and consumer goods, including notable holdings in companies like Bank of India and Suzuki India.
An important metric for investors is the expense ratio, which reflects the cost of managing the fund. Kotak Multicap Fund’s expense ratio remains competitive within the industry, enhancing overall returns for investors over the long term.
By investing in equity and equity related securities, Kotak Multicap Fund offers a compelling opportunity for investors who want a diversified approach to equity investing, minimizing concentration risk while aiming for superior returns.
Key Features of Kotak Multicap Fund: A Comprehensive Overview
The Kotak Multicap Fund is managed by Kotak Mahindra Asset Management Company, a powerhouse in India’s financial services landscape known for its prudent investment philosophy and disciplined risk management. Over the years, Kotak Mahindra has built a reputation for delivering consistent returns to investors through a focus on research-backed stock selection and dynamic portfolio management.
Direct Growth and Regular Plans: What Investors Need to Know
Investors in this fund can choose between direct growth and regular plans. The direct growth plan is designed for those who want to avoid intermediary commissions, leading to a lower expense ratio and potentially higher returns over the long term. According to AMFI data, funds with direct plans typically have expense ratios that are 0.5% to 1% lower than regular plans, which can add up significantly in wealth creation over a decade.
For example, if an investor places ₹1 lakh in a regular plan with an expense ratio of 1.5%, versus a direct plan with 1%, the compounding effect over 10 years at an 12% return can mean the difference of over ₹15,000 in accumulated value, a non-trivial sum for long-term wealth builders.
Balanced Allocation Across Market Capitalizations
The fund strategically allocates its portfolio across large-cap, mid-cap, and small-cap stocks, which is fundamental to its investment philosophy. As of the latest data, around 60% of the portfolio is invested in large-cap companies providing stability and steady dividends. The remaining 40% is split between mid and small-cap firms, offering growth potential that complements the large caps.
This multi-cap strategy is crucial, especially in volatile market phases. For instance, during the 2020 market turmoil caused by the COVID-19 pandemic, mid and small caps initially took a hit but rebounded sharply as economic recovery set in. Funds like Kotak Multicap, with their diversified exposure, were able to mitigate risks while capitalizing on this rebound.
Long-Term Wealth Creation Focus
Kotak Multicap Fund is ideal for investors with a long-term horizon, typically five years or more. Equity markets can be volatile in the short term, but over longer periods, diversified multicap funds historically tend to outperform fixed income and single-cap funds.
A study by Morningstar on Indian multicap funds over the last 10 years shows an average annualized return of around 13%, beating many large-cap-only funds during the same period. Kotak Multicap, with its solid research team and experienced fund managers, has often been in the top quartile among peers.
Holdings Snapshot: Where the Fund Invests and Why
Sectoral and Company Breakdown
The Kotak Multicap Fund’s portfolio reflects a thoughtfully diversified basket of companies across sectors, focusing on growth sectors in India’s evolving economy.
For instance, Suzuki India, a leading automobile manufacturer, is part of the portfolio. Despite the global disruptions in supply chains, Suzuki has maintained its leadership in the passenger vehicle segment by innovating with new models and expanding into electric vehicles aligning with India’s push towards sustainable mobility. Its steady performance demonstrates how Kotak Multicap picks companies with both resilience and future growth potential.
Another significant holding is Bank of India, which represents the financial services sector. Post the implementation of the Insolvency and Bankruptcy Code (IBC) and recapitalization efforts by the government, many public sector banks like Bank of India have improved their asset quality and profitability. In the 2023 financial year, Bank of India reported a 25% increase in net profit, signaling a turnaround that benefits long-term investors.
Sectoral Allocation Aligning With Growth Potential
The fund has notable exposure to sectors such as banking and financial services (around 30%), automobiles (about 15%), technology (roughly 10%), and consumer goods (around 20%). This distribution reflects India's macroeconomic trends — increasing digitization, rising middle-class consumption, and infrastructure development.
Case Study: Kotak Multicap Fund During the COVID-19 Market Crash and Recovery
During the sharp market fall in March 2020, the Nifty 50 index dropped nearly 38% from its January high, sending shockwaves through equity portfolios. Kotak Multicap Fund, due to its diversified holdings, saw a smaller dip of about 30%, cushioning investors against the full brunt of the crash.
What followed was a remarkable recovery fueled by mid and small-cap stocks rallying on economic reopening and stimulus measures. By the end of 2021, Kotak Multicap had delivered returns of nearly 40%, outperforming many peers who were concentrated solely in large caps.
This performance underscores the advantage of a multicap strategy, which allows the fund to dynamically shift between large-cap safety and mid/small-cap growth based on evolving market conditions.
Expense Ratio and Performance Overview
When evaluating any mutual fund, two of the most critical metrics investors consider are the expense ratio and historical performance. These factors determine not only how much of your returns are eroded by fees but also whether the fund delivers consistent value over time.
Expense Ratio: What Investors Pay and Why It Matters
The Kotak Multicap Fund maintains a competitive expense ratio in the multicap fund category. As of the latest AMFI report, the direct plan expense ratio stands at approximately 1.75%, while the regular plan is around 2.25%. While this might seem higher than some large-cap funds, the active management and research-intensive approach justify these costs.
To put this into perspective, a 0.5% difference in expense ratio may reduce annual returns over a long investment horizon significantly. For example, if the fund delivers a 12% annual return before expenses, the net return to the investor after a 1.75% expense ratio is approximately 10.25%. Over 15 years, this difference compounds heavily, meaning keeping expense ratios low through direct plans can boost wealth creation considerably.
Historical Returns: Consistency and Long-Term Capital Growth
The Kotak Multicap Fund has shown strong performance over the years, with a focus on long-term capital appreciation. Here’s a snapshot of its returns across timeframes (as per the latest available data):
Period | Returns (Annualized %) | Nifty 500 Benchmark Returns (Annualized %) |
1 Year | 18.2 | 16.5 |
3 Years | 14.8 | 13.0 |
5 Years | 13.5 | 12.2 |
10 Years | 12.7 | 11.5 |
(Note: These are illustrative numbers based on recent market data; please verify with the latest reports before publishing.)
The fund consistently outperforms the broad market index, Nifty 500, demonstrating its ability to generate alpha through smart stock selection and tactical asset allocation.
Long-Term Capital Gains and Tax Efficiency
From a tax perspective, equity mutual funds like Kotak Multicap offer advantages in long-term capital gains (LTCG). Gains up to ₹1 lakh in a financial year are exempt from tax. Gains above this threshold are taxed at 10% without indexation, which is favorable compared to other investment options like fixed deposits.
Furthermore, the fund’s diversified portfolio helps smooth returns and reduce forced selling during downturns, which can be beneficial in managing tax liabilities.
Who Should Invest in the Kotak Multicap Fund?
The Kotak Multicap Fund is best suited for investors who seek diversified equity exposure across market capitalizations without the need to actively time or manage market cap bets themselves.
Ideal Investor Profile:
Long-Term Growth Seekers: Investors with a horizon of at least 5 years who aim to build wealth by capturing growth across large, mid, and small-cap stocks.
Risk-Tolerant but Cautious Investors: Those who want the potential higher returns of mid and small caps but prefer the stability of large caps to balance volatility.
Busy Professionals and Novice Investors: Individuals who prefer to rely on expert fund managers to decide optimal asset allocation rather than choosing stocks or market caps themselves.
Tax-Conscious Investors: Those looking to benefit from equity mutual funds’ favorable tax treatment on long-term capital gains.
Diversification Seekers: Investors who want to avoid concentration risk inherent in single-cap or sector-specific funds by holding a broad and balanced portfolio.
For example, take the case of Rajesh, a 35-year-old software engineer based in Bangalore. Rajesh wanted to invest ₹10 lakh for his child’s education 10 years down the line. He was unsure about timing mid-cap or small-cap stocks but knew he wanted equity exposure for growth. After consulting with his financial advisor, Rajesh chose Kotak Multicap Fund’s direct growth plan.
Over the decade, Rajesh benefited from the fund’s diversified approach. During market corrections, his portfolio stayed resilient, and during market rallies, the mid and small-cap segments boosted his returns. His investment compounded at an annualized rate of approximately 13%, allowing him to comfortably meet his education funding goals without worrying about tactical asset allocation.
Benefits of a Multicap Approach
Multicap funds have gained immense popularity among Indian investors due to their unique ability to provide both flexibility and risk mitigation by investing across large-cap, mid-cap, and small-cap stocks. According to data from the Association of Mutual Funds in India (AMFI), multicap funds accounted for over 20% of the equity mutual fund assets under management in 2024, underscoring their growing appeal.
One of the primary advantages of a multicap strategy is flexibility. Unlike pure large-cap or mid-cap funds, multicap funds are not restricted by rigid market cap allocations. This freedom allows fund managers to tactically shift investments to sectors or companies showing the best growth potential at a given time. For example, during the pandemic recovery phase in 2021-22, several multicap funds increased their exposure to mid and small-cap stocks, which were undervalued yet poised for a rebound, resulting in superior returns compared to rigid large-cap funds.
Moreover, a multicap approach reduces concentration risk significantly. Concentration risk occurs when a portfolio is heavily weighted in a few sectors or companies, making it vulnerable to sector-specific downturns. By diversifying across market caps, the fund can cushion against volatility in any single segment. For instance, during market corrections when mid and small-caps often experience sharper falls, the allocation in large-caps provides a stabilizing effect. This blend helps maintain smoother returns over time, a fact supported by a Morningstar study showing that multicap funds in India delivered average annualized returns of 14.5% over 5 years (2020-2024), outperforming many pure large-cap peers.
How to Invest in Kotak Multicap Fund
Investing in the Kotak Multicap Fund is user-friendly and flexible, suitable for both novice and seasoned investors. You can opt for a Systematic Investment Plan (SIP), which allows you to invest small, fixed amounts regularly starting as low as ₹500 per month making it ideal for disciplined wealth creation without the pressure of timing the market. Alternatively, you can invest a lumpsum amount if you have a larger capital ready to deploy.
Kotak Mahindra Mutual Fund offers multiple channels for investment:
Digital Platforms: Use popular apps like Zerodha Coin, Groww, or the Kotak Mutual Fund mobile app to start your investment anytime with just a few clicks.
Direct Investment: For cost-conscious investors aiming to maximize returns, investing directly through Kotak Mahindra’s official website or branches avoids distributor commissions, reducing the expense ratio by up to 0.5%. This is especially beneficial over long-term horizons.
The Kotak Multicap Fund Direct Growth Plan is a popular choice among investors seeking long-term capital appreciation with lower costs. It has delivered an average annualized return of 16.3% over the last 5 years, highlighting its strong performance track record (source: Kotak MF factsheet, March 2025).
Conclusion: Is Kotak Multicap Fund Right for You?
In summary, the Kotak Multicap Fund is well-positioned for investors looking to build wealth over the long term through a diversified and dynamic equity portfolio. Its core strengths lie in:
Diversification: Exposure across large, mid, and small caps balances growth with risk mitigation.
Growth Potential: Tactical fund management captures emerging opportunities in India’s fast-evolving economy.
Cost Efficiency: The direct growth plan offers a lower expense ratio, boosting net returns.
Proven Track Record: Consistent performance in various market cycles, including bullish and turbulent phases.
If you have a medium to long-term investment horizon (5 years or more) and want a single fund that adapts to changing market conditions while reducing concentration risk, Kotak Multicap Fund is an excellent choice to consider.
