Portfolio

Kotak Opportunities: Hold

K. Venkatasubramanian | Updated on October 27, 2012

IW 28 Spotlight 2 Kotak_col_1.eps

Investors can retain the units of Kotak Opportunities fund in the light of its fairly reasonable track record. Over one-, three- and five-year time periods, the fund has managed to outperform its benchmark – CNX 500. Kotak Opportunities is a multi-cap fund, though, over the past 12-18 months, the fund has predominantly focussed on large-cap stocks.

It has done a reasonable job in participating in market rallies, but is not that successful in restricting downside during market falls.

Over the past five years, the fund has delivered compounded annual returns of 4 per cent, which places it in the mid quartile of funds in its category. This return is marginally higher than DSPBR Opportunities, but is much lower than Reliance Equity Opportunities, Quantum Long Term Equity and Canara Robeco Equity Diversified.

The fund had a great run up until 2007, when markets were driven by several momentum sectors and mid-cap stocks.

From 2008, the fund’s performance has been average with no significant outperformance of either peers or its benchmark.

Kotak Opportunities is suitable for investors with a relatively high risk appetite. Investors can retain units in view of its long-term track record, but can avoid any fresh exposure to the fund.

Portfolio and strategy

Kotak Opportunities was a fund that took substantial exposure to mid-cap stocks (less than Rs 7,500 crore market capitalisation). This was to the tune of nearly 35 per cent of the portfolio at times. But over the past couple of years, the fund has restricted mid-cap exposure to around 15 per cent. In the market downturn of 2008-09, it took a heavy knock and fell more than its benchmark.

In 2009, the fund had significant exposure to sectors such as construction and power. These sectors have been laggards for a long time now and thus dragged the fund’s returns. But over the past couple of years, the fund has changed focus in terms of increasing large-cap stocks and also choosing sectors that had reasonable momentum about them.

Banks, software, consumer non-durables and pharma have been the top segments held by the fund in the last two years. Again in 2011, exposure of over 20 per cent in banking and financial services stocks, which were underperformers, meant the fund delivered a weak performance.

The portfolio of sectors gives the fund a defensive look, though some of these segments may still have value or momentum in them. The fund earlier held nearly 60 stocks in its portfolio. Over the last couple of years, it has reduced it to 50 stocks, which gives it a very well diversified portfolio, and also a better chance of containing downsides during market correction. The NAV per unit of the growth option is Rs 47.4

Published on October 27, 2012

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