The Hindu Business Line : Kotak MNC: Invest

EXPOSURES may be considered in Kotak MNC Fund, as it has a fairly impressive track record. The portfolio also appears designed to go through any period of correction in equities with limited downside risk.

As the equity market is likely to encounter a high degree of volatility and moderate returns over the next couple of years, this fund will be an appropriate way to handle such conditions. In such a milieu, MNC stocks tend to be less volatile and also retain much of the price gains.

Investors could use the systematic investment plan, as it will ensure that the amount is not locked up at one time and will also enable them to capitalise on weakness in the broad market. If an SIP had been used in this fund over the past five years, investors would have secured annual returns of 40 per cent; this would have been substantially higher than the returns of 24 per cent the fund has generated during this period.

This highlights benefit of investing across different phases of the market. Over a three-year period as well as the past year, such a strategy would have delivered returns in line with the fund's performance.

Kotak MNC invests in stocks of multi-national companies and adopts an aggressive approach. This has not constrained the fund from developing a diversified portfolio. It also has exposures in a few emerging Indian companies on the global stage. The fund's five-year returns bear the scars of a launch at the peak of the bull market in 2000. It has, however, improved considerably with the impressive showing over the past couple of years.

The NAV of the fund rose by about 55 per cent in 2005. It has comfortably outpaced the Nifty and Sensex and the higher returns is attributable to mid-cap exposures as well as the sizeable gains posted by engineering-sector big wigs such as Siemens and ABB.

Interestingly, the fund appears to have capitalised on the bullish trend in Siemens and has exited the stock. Stock selection with picks such as Ciba Specialty, AstraZeneca Pharma and Atlas Copco inspire confidence. The portfolio wears a more diversified look now, compared to nine months ago when we had made an `invest' recommendation.

The fund has a small asset base of about Rs 55 crore. This is likely to aid performance, as the fund will be able to buy and sell without attracting too much attention, and, as a result, also avoid a high impact cost. This also provides it the flexibility to have a compact portfolio of 20-25 stocks.

Suitability: The risks associated with the fund are in line with a typical diversified portfolio. Kotak MNC should not, however, figure among the top picks for a portfolio of equity funds.

If you have exposures in funds such as HDFC Equity, HDFC TaxSaver, Magnum Contra, Reliance Growth and Franklin Prima, this fund could be considered, as it will provide a neat complement with its differentiated focus. Investors could choose dividend re-investment.

Fund facts: Kotak MNC was launched in April 2000. The minimum investment is Rs 5,000. The entry load is 2.25 per cent. There is no exit load. Mr Kenneth Andrade manages the fund.

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