Investors with moderate risk appetite and a relatively long horizon of five-seven years can opt to buy the units of Kotak Select Focus Fund. The fund primarily invests in large-cap stocks (those with market capitalisation above ₹10,000 crore) and increases the exposure towards mid-cap stocks during market rallies. During market downturns, the fund adopts a defensive approach by increasing debt and cash holdings.

Performance

This fund is among the best-performing schemes over the long term, and has consistently found a place in the top-quartile of the large-cap fund universe in the last five years.

The fund has beaten the returns of its benchmark, Nifty 200, by 4-7 percentage points over three- and five-year periods, and category returns by 4-6 percentage points. But over the last one year, it has underperformed the benchmark and category by around one percentage point. Much of the under-performance has been in the past few months. During this period, the fund had higher exposure towards large-cap stocks which missed higher returns from the mid-cap rally. On a one-year rolling-return basis, the fund has outperformed its benchmark 92 per cent of the time in the past three years.

This fund has delivered higher returns than ICICI Pru Focused Bluechip Equity and Mirae Asset India Equity over a five-year period.

Portfolio

Currently, the fund has parked around 85-90 per cent of its corpus in large-cap stocks. HDFC Bank, Larsen & Toubro, Reliance Industries, Housing Development Finance Corporation and ICICI Bank are the scheme’s top stock picks. Generally, index names from the Sensex and Nifty find their way into the portfolio.

The fund’s allocation to banking and financial services stocks is rather high. It has invested around 22 per cent in banks and 12 per cent in the finance sector. Much of its recent under-performance may be attributed to the ongoing crisis in the sector, with scams and poor lending practices coming under the scanner. The fund has around 8 per cent of its corpus in debt holdings.

Stocks picks such as MRF, Maruti Suzuki, Britannia Industries, and Bajaj Finserv worked well for this fund. Prices of these stocks have rallied at 20-50 per cent in the past one year.

Prices of stocks such as Sun Pharmaceutical Industries, Tata Motors and Max Financial Services, which have been lackadaisical, have fallen by around 20-25 per cent in the past one year, pulling down the fund’s returns.

Stocks such as Jubilant FoodWorks, Bata India and Interglobe Aviation were added in recent months.

The fund’s strategy of churning its portfolio well by blending cyclicals and defensives, has helped it over the years.

Kotak Select Focus can be a good addition for investors looking for above-average returns over the long term, but have a moderate appetite for volatility.

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