Mutual Funds

Kotak 50: Hold

Srividhya Sivakumar | Updated on September 10, 2011

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Unit-holders of Kotak 50 can avoid fresh exposure to the fund, as it is early days to assess its performance post its mandate change in January 2011. The fund has underperformed its peers over a three and five-year time frame, due to its chequered performance in its earlier avatar as Kotak 30.

In January this year the fund modified its investment objective to hold up to 59 stocks from its earlier limit of 30 in order to reduce volatility in the fund. While this has helped contain declines in line with peers in 2011, sustainability of performance must be watched for.

Investors looking for large-cap exposure now would be better-off with time-tested options such as DSPBR Top 100, Franklin Bluechip or HDFC Top 200.

Performance: Kotak 50 declined 7.6 per cent over a one-year period, in line with the large-cap category average and 2.5 percentage points lower than its benchmark Nifty. While the fund has diversified its portfolio, it still holds a good number of Nifty stocks, which essentially means that its performance would not be too different from its benchmark. From the market highs in November 2011 too, the fund has contained declines marginally better than large-cap funds such as HDFC Top 200. Viewed in this light, the recent performance provides some hope. Over three- and five-year periods, the fund delivered compounded annualised return of 6 per cent and 10 per cent respectively.

While these are a couple of percentage points better than its benchmark, it trails quite a few large-cap peer funds by a considerable margin. However, such weak performance is not entirely alien in the large-cap category. Funds such as Sundaram Select Focus, HSBC Equity or index funds based on Nifty/Sensex have all delivered similar or lower returns over a three-year period.

Portfolio: Kotak-50 doesn't restrict its exposure to Nifty stocks and has investments outside the bellwether's basket of stocks too. In its August portfolio, more than half its assets are invested in stocks from the energy, financial and technology sectors.

Its portfolio is largely concentrated, with the top 10 stocks making up more than half its portfolio value. The fund also has a sprinkling of mid-cap stocks such as Torrent Pharmaceuticals, United Phosphorus, Jain Irrigation, HT Media and Fortis Healthcare.

Published on September 10, 2011

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