The Hindu Business Line : Kotak Opportunities: Invest

Investors can buy the units of Kotak Opportunities Fund, considering its consistent track record in delivering returns since its inception and its ability to outperform its benchmark significantly during market upsides. The fund has been among the top ten percentile of diversified funds over the last three years.

Kotak Opportunities might be suitable for investors with a high risk appetite, considering the fact that it may not be able to contain downside too well.

Being in the ‘opportunities’ category, the fund takes concentrated exposures in sectors and stocks that can benefit from market momentum, to take advantage of market upswings.

Performance: Kotak Opportunities has outpaced its benchmark S&P CNX 500, on a one- and three-year returns basis. The fund has delivered better returns than other comparable funds such as Franklin India Opportunities, HSBC Opportunities and Reliance Equity Opportunities, and the diversified scheme category. During the market rallies in 2006 and 2007, the fund outperformed significantly, at times by as much as 20 percentage points, as was the case in the August 2007-January 2008 rally.

But in market declines, especially prolonged ones such as this year, the fund has lost more value than its benchmark. In such phases, investments through a systematic investment plan may be considered to average costs.The fund is thus suitable for aggressive investors who seek to ride market momentum through ‘in-favour’ sectors and stocks, and with the appetite to digest heavy falls during market downtrend.

Strategy: Kotak Opportunities beat its benchmark by a wide margin in 2006 and 2007 by taking exposures to sectors such as capital goods, banks, metals and construction. The fund also had large exposures to mid-cap (less than Rs 7,500 crore market capitalisation) stocks, which aided this outperformance.

But this also meant that the fund took a beating during market correction from January this year and fell more than its benchmark. So also in the May-June 2006 correction.

But in the last few months the fund increased exposure to defensive sectors such as IT services (the top holding in the July portfolio) telecom services and consumer non-durables.

From a portfolio that had over 33 per cent invested in mid-cap stocks in July 2007, the fund’s current portfolio has a strong large-cap bias. Together this may indicate a strategy towards containing downsides and the possibility of large-caps being more capable of participating in a market uptrend.

Fund Facts: The NAV per unit of the growth scheme is Rs 35.4. Mr Krishna Sanghvi and Mr Anurag Jain manage the fund.

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