Kotak 50: Hold :: Business Line

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Unit-holders of Kotak 50 can hold on to their investments in the fund. While the fund has underperformed some of its peers over different time periods, it has managed to keep pace with its benchmark.

The fund has also seen a slight improvement in performance in 2011 after a change in its investment objective.

In January last year, it had modified its investment objective to hold up to 59 stocks from its earlier limit of 30 in order to reduce volatility.

However, any significant underperformance as against the category average and benchmark in the coming quarters would be a signal to exit the fund.

Suitability: While Kotak 50's large-cap bias has helped it contain declines and market volatilities well, its performance during market rallies has been chequered.

The fund, therefore, is more suitable for conservative investors. Investors looking for fresh exposure to large-cap funds now would be better off going with time-tested fund options such as Franklin Bluechip, Quantum Long Term Equity or HDFC Top 200 instead.

Performance: Kotak 50 declined 5.5 per cent over a one-year period, a shade better than the large-cap category average and 1.5 percentage points lower than its benchmark Nifty.

Its performance could have been better had it not been for its relatively poor returns in the 2012 rally.

Its year-to-date return of 8.8 per cent is a far cry from the 15 per cent delivered by large-cap funds as a category as well as its benchmark.

Its ability to mirror market returns during market rallies has been chequered in the past too.

For instance, from March-2009 lows to the year end, the fund delivered 91.2 per cent, while CNX Nifty managed 102 per cent.

The fund, however, made a notable comeback in the volatile market of 2011. It limited its NAV losses to 18 per cent over the year (CNX Nifty lost 24.6 per cent) and sealed a place in the top quartile in its category.

While the change in its investment objective could have come to its rescue, it certainly wasn't the only reason, as the fund never really held beyond its typical 30-35 stocks in its portfolio during the year.

Though the fund doesn't limit its stock choices to Nifty-50 stock alone, it holds a good number of Nifty stocks in its portfolio.

Its performance, therefore, might not be too different from its benchmark.

For instance, over three- and five-year periods, it delivered about 17.2 per cent and 7.6 per cent, respectively, bettering its benchmark by just about 1-2 percentage points.

It, however, trailed quite a few large-cap peer funds by a considerable margin during these periods.

Even during the 2008 market correction, the fund lost about 47 per cent (from January-2008 highs to March-2009 lows), mirroring a similar performance by its benchmark.

Portfolio: In its March portfolio, about 44 per cent of the fund's portfolio is invested in stocks from outside of the index stocks.

Its portfolio is largely concentrated, with the top 10 stocks making up half its portfolio value.

The fund also has a sprinkling of mid-cap stocks such as IRB Infrastructure, GMDC, Eicher Motors, Redington India, AIA Engineering and Bayer CropScience.

Overall, its portfolio sports a defensive flavour, with a significant exposure to FMCG, software and pharmaceuticals during the year.

Software, consumer non-durables and banks make up the top three sectors in its latest portfolio.