Sunday, March 27, 2016

Kotak Emerging Equity

 

Kotak Emerging Equity Invest Online

 
 
 

Investors who bought units of Kotak Emerging Equity could continue to hold the fund. Fresh investments are not recommended in the fund at this juncture, given the likely volatility ahead and the fund's tilt towards the risky small-cap space.

Kotak Emerging Equity is a diversified equity fund that predominantly invests in mid and small-cap companies, and is benchmarked against the S&P BSE Mid & Small Cap Index.

The fund has managed to beat the benchmark 92 per cent of the time on a rolling one-year return basis over the past five years. It maintains its equity allocations between 90 and 98 per cent.

Though the fund has outperformed Kotak Midcap, an exclusive mid-cap fund from the same fund house, it has a more small-cap tilt in its portfolio.

In this segment it has underperformed against seasoned funds such as Franklin India Smaller Companies, Canara Robeco Emerging Equities and DSP BR Microcap.

But the fund's returns stack up well against its benchmark. Kotak Emerging Equity has delivered 12.3 per cent, 26.9 per cent and 14.6 per cent over the past one, three and five years, respectively, comfortably beating the benchmark by 5 to 8 percentage points. Over the last one year, the fund has also managed an improvement in performance, moving up to the top quartile.

Performance and Strategy

Kotak Emerging Equity was launched in early 2007 at the fag end of the last bull market. It did not contain the downside well in 2008 and also failed to fully capitalise on the subsequent bull-run in the year 2009.

However, from 2010 onwards, the fund has shown an improvement in performance. It beat the benchmark in the years 2012 and 2014. It follows a growth style of investing and holds stocks for the long term.

The fund approximately holds 60 stocks spread across 24 sectors. From banks, industrial products became the top preferred sector in early 2015. The fund has upped its allocation in this sector to 15 per cent.

The top three sectors are industrial products, financials (including banks and finance) and pharma, which make up 41 per cent of the portfolio.

In the last one year, the fund maintained the same array of sectors; construction and power are the only new entries.

The exposure is fragmented and apart from the top four stocks, the remaining account for less than 2.5 per cent each of the portfolio, which reduces risk.

Strides Arcolab is among the top 10 stocks that entered the portfolio this April and has delivered more than 35 per cent returns since then.

Solar Industries India and Whirlpool of India have been long-term holdings, present in the portfolio for more than four years. Both are multi-baggers. Conversely, stocks such as Shriram City Union Finance, Persistent Systems and Hawkins Cooker have been underperforming lately. SRF, Pennar Engineered Building Systems, Axis Bank and Jubilant FoodWorks are the few new entries of recent times.

 
 
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