Kotak 50: Rides out choppy times with large-cap slant

Kotak 50 is a safe bet for investors looking to ride out the ongoing volatility in the markets. Benchmarked to the Nifty 50, the fund focuses on investing in large-cap stocks. It is adept at containing downsides and at the same time gives moderately good returns when the tide turns. Investors with a low risk appetite could consider parking their investible surplus in this fund.

The fund has bettered its benchmark by 4 to 5 percentage points over one, three and five years. Over the same time periods, its returns are on par with other large-cap-focused funds, such as ICICI Prudential Focused Bluechip Equity. In longer timeframes, Kotak 50 has delivered the goods on the SIP front too. The SIP route has been more rewarding over the last five years, fetching about 13.5 per cent and vis-à-vis the 10 per cent returns in the lumpsum route.

Smart moves pay off The fund has, time and again, held its nerve in falling and iffy market conditions, be it the steep fall of 2008 or the blow hot, blow cold markets of 2011 and 2015. Its large-cap focus works in its favour in these situations. Rain or shine, the fund’s exposure to mid-cap stocks is less than 10 per cent of the portfolio.

What merits mention is the fact that even in the last one year, when large-cap stocks took a greater beating than mid- and small-caps, the fund held its ground, losing only 6 per cent, compared with the Nifty 50’s 11 per cent fall. Good sector and stock picks helped, with the fund pruning stakes in some of the beleaguered banks, such as SBI and ICICI Bank and avoiding other PSBs completely.

At the same time, it increased exposure to select stocks in the cyclical auto and defensive consumer non-durable space, which did relatively well. Interestingly, while Kotak 50 has been an underperformer in bull markets such as the ones in 2009, 2010 and 2012, it has improved its record in recent times. In the 2014 rally, the fund delivered 42 per cent returns, as against the Nifty 50’s 31 per cent rise.

On a one-year rolling return basis, the fund has bettered the benchmark’s returns 87 per cent of the time in the last three years, compared with only 63 per cent of the time in the last five years. That Harsha Upadhyaya took over the fund’s management in August 2012 has, perhaps, helped.

Banking and software are the top sector holdings now. Among banks, private banks such as HDFC Bank, Axis and IndusInd have been preferred.

The fund has used the regulatory clean chit to Nestle India and corrections in the Dabur India stock as opportunities to enter these stocks. Improving outlook for rural consumption has also seen the fund raise stakes in Mahindra and Mahindra and Hero MotoCorp in the last three months.

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