The second wave of COVID-19 pandemic has batted a hard hit on the economy with uncertainty lingering on businesses across sectors. It is, therefore, essential to make worthy mutual fund investments in sectors and companies that can survive the market volatility and limbo until recovery.

Many investors now favour index funds as a hedge against market volatility caused by the pandemic due to its passive investing strategy. Index funds are considered to be the simplest option for any investor with little know-how of the equity markets.

Index funds invest in a market index such as the NSE Nifty or S&P BSE Sensex and mimic the benchmark’s performance to produce returns that are more or less equivalent to the underlying index, subject to tracking errors.

Kotak Mahindra Mutual Fund has launched Kotak Nifty 50 Index Fund to help navigate market volatility in the long term; it is an open-ended scheme replicating/ tracking the Nifty 50 index. This fund will invest in 50 large-cap companies comprising the underlying index and provide investors with an opportunity to be part owners of India’s most formidable companies.

On the launch of this fund Mr Harsha Upadhyaya President and CIO – Equity at Kotak Asset Management Company said, “Kotak Nifty 50 Index fund is a one-stop solution for long-term wealth creation and is a good choice for investors looking to participate in India’s growth story over the next few decades. As a passive, low cost fund, it allows investors to participate in a diversified portfolio of large cap blue chip companies by tracking Nifty 50 Index.”

Table 1: Details of Kotak Nifty 50 Index Fund

Type An open-ended scheme replicating/ tracking Nifty 50 index. Category Index Fund
Investment Objective The investment objective of the scheme is to replicate the composition of the Nifty 50 and to generate returns that are commensurate with the performance of the NIFTY 50 Index, subject to tracking errors. However, there is no assurance that the objective of the scheme will be realized.
Min. Investment Rs 100/- and in multiples of Re 1 thereafter. Additional purchase Rs 100/- and in multiples of Re 1 thereafter. Face Value Rs 10/- per unit
SIP/STP/SWP Available
  • Direct
  • Regular
  • Growth
  • Income Distribution cum Capital Withdrawal Option
Entry Load Not Applicable Exit Load Nil
Fund Manager
  • Mr Devender Singhal
  • Mr Satish Dondapati
  • Abhishek Bisen
Benchmark Index Nifty 50 Index TRI
Issue Opens: May 31, 2021 Issue Closes: June 14, 2021

(Source: Scheme Information Document

What will the Investment strategy of Kotak Nifty 50 Index Fund be?

Kotak Nifty 50 Index Fund to achieve its investment objective, the scheme will follow the passive investment strategy with investments in stocks in the same proportion as in NIFTY 50 Index.

This scheme will aim to generate returns equivalent to the Total Returns Index of Nifty 50 Index by minimizing the performance difference between the benchmark index and the scheme. The underlying index consist of top 50 large cap companies that have a growth potential.

The investment strategy would revolve around reducing the tracking error to the least possible point through rebalancing of the portfolio, taking into account the change in weights of stocks in the index as well as the incremental collections/redemptions from the scheme.

About the benchmark

The Nifty 50 index is a well-diversified index of 50 companies that reflect the overall market conditions. Nifty 50 Index captures 66% of NSE float-adjusted market capitalization and tracks the behaviour of a portfolio of the 50 largest and most liquid Indian stocks.

The Nifty 50 Index has a wide spread with allocation in 13 sectors and the index rebalances semi-annually to capture current trends in the economy.

The following is list of top constituents and sectors by their weightage currently:

(Source: Kotak Nifty 50 Index Fund Presentation

Apart from investing 95% of its assets in equity and equity related securities covered by the Nifty 50 Index including derivatives, this scheme will also invest up to 5% of its assets in debt and money market instruments in order to meet the liquidity requirements.

Under normal circumstances, the asset allocation will be as under:

Table 2: Asset Allocation of Kotak Nifty 50 Index Fund

Instruments Indicative Allocation (% of net assets) Risk Profile
Minimum Maximum High/Medium/Low
Equity and Equity related securities covered by the Nifty 50 including Derivatives 95 100 Medium to High
Debt and Money Market Instruments 0 5 Low to Medium

(Source: Scheme Information Document

Who will manage Kotak Nifty 50 Index Fund?

Mr. Devender Singhal, Mr. Satish Dondapati, and Mr. Abhishek Bisen will be the dedicated Fund Managers for the Scheme.

Mr. Devender Singhal is Fund Manager at Kotak Mahindra Asset Management Companies Ltd. and he has over 20 years of work experience in equity research and fund management. Prior to joining Kotak Group, he was associated with Religare, Karvy, and P N Vijay Financial Services.

His qualifications include PGDM (Finance) and B.A. (H) Mathematics. Currently, the other schemes he manages are Kotak Asset Allocator FundKotak PSU Bank ETFKotak Debt Hybrid FundKotak Nifty ETFKotak Banking ETFKotak Sensex ETFKotak NV 20 ETFKotak India Growth Fund Series 4Kotak IT ETFKotak Nifty Next 50 Index Fund, and Kotak Equity Savings Fund.

Mr Satish Dondapati is Fund Manager at Kotak Mahindra Asset Management Companies Ltd. and he has over 13 years of work experience in ETF. Prior to joining Kotak AMC, he was in the MF Product Team of Centurion Bank of Punjab. He has earned an MBA (Finance).

Currently, the other schemes he manages are Kotak Sensex ETFKotak PSU Bank ETFKotak Nifty ETFKotak Banking ETFKotak NV 20 ETF,Kotak Gold ETFKotak IT ETF, and Kotak Nifty Next 50 Index Fund.

Mr Abhishek Bisen is Sr. Vice President and Fund Manager – Fixed Income at Kotak Mahindra Asset Management Companies Ltd. and he has over 17 years of experience in financial services. Prior to joining Kotak AMC, he was working with Securities Trading Corporation Of India Ltd in Sales & Trading of Fixed Income Products apart from doing portfolio advisory and 2 years of merchant banking experience with a leading merchant banking firm.

Mr Bisen’s qualifications include a B A Management and MBA (Finance). Kotak Bond FundKotak Gilt fundKotak Debt Hybrid FundKotak Gold FundKotak Gold ETFKotak Equity Savings FundKotak Equity Hybrid FundKotak Balanced Advantage Fund, and Kotak NASDAQ 100 Fund of Fund are the other schemes he manages.

Fund Outlook – Kotak Nifty 50 Index Fund

Kotak Nifty 50 Index Fund will replicate the composition of the Nifty 50 index and generate returns equivalent to the performance of the underlying index. It provides exposure to the equity market in one efficient well-diversified portfolio of the top 50 large cap companies.

This scheme, by passively investing in Nifty 50 index, offers investors with an exposure and diversification across sector leaders and captures the trends in the economy.

Being an Index fund, it will passively track the underlying index and its performance, these funds have low expense ratio as compared to actively managed funds. This scheme will invest in large-cap stocks having relatively lesser volatility compared to investments in mid and small caps and could be able to withstand the various market phases.

Remember this scheme will provide investment in the top 50 large cap companies that hold a growth potential and the passive investment strategy aims to eliminate the fund manager biases by limiting their involvement.

This scheme is suitable for investors seeking to invest in composition of Nifty 50 index and have a high risk tolerance with long investment horizon, ensure that your investment objective aligns with the fund.

This article first appeared on PersonalFN here

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