Mutual Funds

Kotak Equity Opportunities: Beats volatility over long term

Yoganand D | Updated on April 04, 2020

Nippon India stopped accepting lumpsum investment in the small cap fund on March 26 and capped STP and SIP to ₹1 lakh per instalment   -

Has outdone its benchmark, Nifty 200 TRI, over past one-, three- and five-year periods

The Covid-19 pandemic has intensified the volatility in the global as well as domestic equity market. The correction provides buying opportunity for investors with a long-term horizon. Investors with a moderately high risk appetite looking to invest in the large- and mid-cap category can accumulate units of Kotak Equity Opportunities. Investing through the systematic investment plan (SIP) route can mitigate market volatility.

The fund has steadily outperformed its benchmark index, the Nifty 200 TRI over the past one-, three-and five-year periods. In the longer term, for instance, over the past seven- and 10-year periods, the fund has outpaced the benchmark by 2-3 per cent. The fund has been rated five-star by BusinessLine Portfolio Star Track MF Ratings.

In the last one year, the fall in the scheme’s NAV has been lower than its benchmark’s — the fund has tumbled 23.3 per cent, whereas the Nifty 200 TRI has plummeted 28.9 per cent.


Performance and strategy

After marginally outperforming the category in 2017, the fund turned an underperformer in 2018.

But it bounced back strongly in 2019 and registered category-beating returns. It has been in the top quartile of the category over the past three- and five-year periods. The scheme is best suited for disciplined investors who can remain invested in it for more than four years. Kotak Equity Opportunities has outpaced some of its peers in the long run, namely DSP Equity Opportunities, SBI Large & Midcap and L&T Large and Midcap.

The fund has to invest at least 35 per cent each in both large- and mid-cap stocks. In the recent months, it has increased the mid-cap allocation, possibly due to the significant correction in valuation in these stocks. The recent allocation between large- and mid-cap is 45 per cent each, and small-cap has 6 per cent allocation. It also takes debt and cash call. Kotak Equity Opportunities hold 55 stocks in the kitty. The top 10 stocks constitute 39 per cent and the top three sectors is 36 per cent of the portfolio. Banks, gas and cement are the current top preferred sectors. The banking sector portfolio is dominated by private banks such as ICICI Bank, HDFC Bank and Axis Bank.

The fund has upped its allocation to consumer non-durables and added auto ancillary as well as paper sectors in the last six months.

Besides, it is overweight in industrials and cement sectors compared with the benchmark.

On the other hand, it is underweight in financials, FMCG and auto. Hindustan Unilever, United Breweries and Kotak Mahindra Bank were added to the portfolio recently.

Published on April 04, 2020

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