However, other routes like subscription or switch-ins in the scheme, or registration of new dividend transfer plan, remain temporarily suspended.
The scheme had stopped fresh inflows altogether in February 2017 following a sharp run-up in prices and dearth of good investing opportunities.
In a recent interaction with Business Standard, Kalpen Parekh, president of DSP Mutual Fund, said: “When we stopped taking money one-and-a-half years back (for the small-cap scheme), we felt good firms in the space had seen a sharp run-up and that, these may consolidate in terms of price. Also, a lot of money was chasing the same stocks. That is where capacity became a constraint.”
Another scheme, L&T Emerging Business, which had limited daily investment at Rs 200,000 per investor, has removed the cap. These restrictions were applicable to subscriptions and switch-ins (including systematic transactions). The SBI Small & Midcap Fund (now SBI Small Cap), which was suspended for new investments in October 2015, re-opened for fresh subscriptions through SIPs in May. However, the scheme maintained a cap of Rs 25,000 a month, per investor.
In year-to-date, the BSE Small-Cap Index has corrected 11 per cent. It corrected nearly 13 per cent between May and June. In the last two months, it has recouped some of the losses.
Fund houses say there could be further relaxation, depending on how the market behaves.
Smaller fund houses are even mulling the idea of launching small-cap schemes to fill gaps in their product offerings.
In July, Edelweiss MF filed a draft paper with Securities and Exchange Board of India, for a small-cap fund. Radhika Gupta, CEO of Edelweiss MF, had earlier said a small-cap fund was a possibility as it offered a counter-cyclical opportunity.
Motilal Oswal AMC had also filed for a small-cap fund. However, MD and CEO Aashish Somaiaya had said he would wait for a more appropriate time.
Some analysts have turned bullish on the small-cap space. “We are more positive on small-caps than large-caps, where we feel there has been a bit of over-valuation. In small-caps, there are signs of earnings recovery and some could even provide deep-value opportunities. We are bullish on select pharma and auto-ancillary firms,” said Abhimanyu Sofat, head of research at IIFL.