Fund Call - Kotak Opportunities. Kotak Opportunities: An improved show in recent times

Investors with a long-term perspective can buy the units of Kotak Opportunities Fund. The fund has delivered 16.3 per cent returns over the last five-year period against its benchmark Nifty 500’s return of 11.9 per cent. It has delivered 11 per cent returns over the last one year, well above the benchmark’s 5.9 per cent returns. It has also beaten its peers such as Franklin India Opportunities, HSBC India Opportunities and Reliance Equity Opportunities over the last one year. The rally in equities since this February has helped the fund move into the top quartile of funds in the multi-cap funds category.

The fund’s performance has seen a pick-up in recent years. While it failed to contain downside in the 2008 market fall, it managed to cap losses better during 2011 and 2015. Kotak Opportunities has outperformed its benchmark, on one, three and five-year returns basis by 4-6 percentage points. Investors with a high risk appetite can use the current market correction to invest in this fund through SIPs.

Kotak Opportunities takes concentrated bets in sectors and stocks to ride on market momentum. The top three sectors constitute 50 per cent, while the top ten stocks contribute 34 per cent of its portfolio. About 7 per cent of its assets is parked in cash and debt.

The fund predominately focuses on growth-oriented large-caps. It has about 21 per cent of its exposure in mid-caps which have been on a roll, spicing up the fund’s returns.

Following a mixed performance between 2011 and 2013, the fund clocked 50 per cent returns in 2014, backed by a strong rally in banking, software and automobiles, which were its top sector holdings. The fund subsequently trimmed its allocations to the software sector.

Though the fund takes concentrated exposures, its investment in individual stocks is well diffused. It has about 57 stocks in the portfolio. Excluding the top preferred HDFC Bank, the allocations towards other stocks are below 4 per cent. Banking & Finance is the top preferred sector but the fund is currently underweight on this space vis-a-vis its benchmark. It is also underweight on IT, FMCG and pharma sectors. On the other hand, the fund is overweight on the Energy, Construction and Automobile sectors which are consumption-driven. Although there could be a short-term dip in the performance of these sectors due to demonetisation, the long-term picture is positive.

The fund has increased its exposure in stocks such as HDFC Bank, Hero MotoCorp, Maruti Suzuki India and Reliance Industries. Possible revival in rural consumption and infrastructure growth can boost the fund’s returns in the long run.