The Hindu Business Line : Kotak Opportunities: Hold

Investors can retain their holdings in Kotak Opportunities Fund. The fund has had an impressive start with a return of 88 per cent since its launch in August 2004. It also figures among the top ten performers over the past six months.

Since its launch, the fund has witnessed a predominantly bull market over 2005. While it has weathered the volatility during the rally, the fund is yet to go through various cycles of the market. Fresh investments can, therefore, be avoided until it acquires a more complete track record. Kotak Opportunities may be classified as one of the early birds among funds with a mandate to invest across various market cap segments and also take concentrated exposure to specific sectors. This gives the fund the flexibility to adopt different strategies based on market conditions.

While the fund started with a 50:50 allocation to large and mid-cap stocks, it increased large-cap holdings to about 65 per cent by December 2004. This move, although a bit early, was not completely out of place as the fund managed to weather the mid-cap slump over the first half of 2005. It later increased exposure to stocks with a market cap of less than Rs 2,000 crore over July and August 2005 to capitalise on the short mid-cap rally.

The above strategy indicates that the fund has timed its move well, although it did not outperform the CNX Midcap index during the brief rallies. The fund has, over the past six months, moved in tune with the large-cap rally and now holds 60 per cent in stocks with a market cap of over Rs 5,000 crore.

Going forward, taking a call on the likely performance of large and mid-caps at appropriate points will determine the fund's performance. This also increases its risk profile compared to diversified funds and is, therefore, better suited for aggressive investors. Such funds should not form the core of any portfolio; they may be an addition, to step-up returns.

Performance: Kotak Opportunities has returned 101 per cent over the year as against the 74 per cent yield of its benchmark, S&P CNX 500. This return is also superior to a number of diversified equity funds.

Franklin India Flexi Cap and Kotak Opportunities are a few of the spate of multi-caps, launched over the past year and a half, that have managed to come up with impressive performances. The rest, such as HDFC Premier Multi-Cap and Chola Multi-Cap, have only managed a relatively mediocre performance with a less-focussed strategy.

Portfolio overview: Kotak Opportunities' portfolio illustrates a good number of stocks in current themes such as consumer goods and metals. The fund has, however, restricted exposure to cement stocks at 5.5 per cent despite firm trends in cement prices witnessed for over a quarter.

ITC, Mahindra & Mahindra and Punjab National Bank have stayed in the portfolio for over a year now. This buy-and-hold strategy has helped it reap rich gains.

The fund also holds some offbeat small-cap stocks such as Dynamatic Technologies and Nahar Industrial Enterprises.

Fund facts: The fund has, on most occasions, managed a portfolio of about 40 stocks. From Rs 53 crore in April 2005 the asset base has grown to Rs 333 crore in April 2006. Mr Anand Shah has managed the fund since April 2005.

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