Large & Mid Cap Mutual Funds are equity-oriented mutual funds that offer you an opportunity to create wealth by investing in an optimum mix of large-cap and mid-cap stocks, i.e., the leaders of today as well as the future leaders. Thus, you benefit from the stability of large-caps and the high growth potential of mid-caps through a single fund.
Large-cap stocks are known to provide steady returns, while mid-cap stocks have the potential to generate high returns. A combination of these stocks in the portfolio can help you to earn optimal risk-adjusted returns.
Click here to find out PersonalFN’s list of best Large & Mid Cap Funds to invest in 2023.
Kotak Equity Opportunities Fund is an opportunities-style Large & Mid Cap Fund that has managed to generate benchmark-beating returns over the long run while keeping the risk level low.
Graph 1: Growth of Rs 10,000 if invested in Kotak Equity Opportunities Fund 5 years ago
Past performance is not an indicator of future returns
Data as on February 15, 2023
(Source: ACE MF)
Launched in September 2004, Kotak Equity Opportunities Fund is primarily an opportunities-style fund that looks for investment opportunities across various sectors based on the performance and growth potential of companies within the sectors. The fund holds a diversified portfolio of stocks spread across market caps by utilising the bottom-up investment strategy. This strategy helped the fund to contain the downside risk during bearish phases, including the market crash of 2020. In the ensuing bull phase though the fund has marginally trailed the benchmark, the performance was line with the category average. In the last 5 years, Kotak Equity Opportunities Fund has generated a compounded annualised return of around 13.8%, which is about two percentage points higher than the returns delivered by its benchmark Nifty LargeMidcap 250 – TRI. An investment of Rs 10,000 in the fund 5 years back would have now grown to Rs 19,059 compared to a valuation of Rs 17,553 for a simultaneous investment in its benchmark. The fund manager, Mr Harsha Upadhyaya, has proven his ability to timely identify and capture available opportunities and create significant wealth for long-term investors.
Table: Kotak Equity Opportunities Fund’s performance vis-á-vis category peers
|Quant Large & Mid Cap Fund
|ICICI Pru Large & Mid Cap Fund
|Mahindra Manulife Top 250 Nivesh Yojana
|HDFC Large and Mid Cap Fund
|UTI Core Equity Fund
|Mirae Asset Emerging Bluechip
|SBI Large & Midcap Fund
|Edelweiss Large & Mid Cap Fund
|Axis Growth Opp Fund
|Kotak Equity Opp Fund
|NIFTY LargeMidcap 250 – TRI
Returns are point to point and in %, calculated using the Direct Plan-Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on February 15, 2023
(Source: ACE MF)
*Please note, this table only represents the best performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme-related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.
Kotak Equity Opportunities Fund has a track record of outperforming the benchmark and the category average over longer time periods. Notably, the fund could not fully participate the bull phase of 2020-2021, wherein it trailed its benchmark Nifty LargeMidcap 250 – TRI and many of its peers by a noticeable margin. This impacted its returns in the short to medium term. However, the fund displayed its strength when the market started witnessing sharp volatility from October 2021 onwards by managing the risk better than the benchmark and the category average. Over the long-term period of 5 years and 7 years, Kotak Equity Opportunities Fund has outpaced the benchmark as well as many of its peers.
Its standard deviation of 22.20% signifies that the fund’s volatility has been much lower than the category average and the benchmark, whereas its risk-adjusted return (Sharpe Ratio) that denotes the fund’s ability to reward investors is competitive to the category average as well as the benchmark.
Investment strategy of Kotak Equity Opportunities Fund
Classified under the Large & Mid Cap Funds category, Kotak Equity Opportunities Fund is mandated to invest at least 35% of its assets in large caps with a simultaneous investment of at least 35% in mid-caps. Accordingly, the fund intends to hold a portfolio diversified across market caps. The current investment mandate still allows the fund to continue with its opportunistic investment style, where it looks for growth opportunities across sectors by investing in high-potential large and mid-cap companies within those sectors.
While selecting stocks for Kotak Equity Opportunities Fund’s portfolio, the fund manager follows a combination of the top-down and bottom-up approaches to stock picking. The fund focuses on finding opportunities in certain sectors that the fund manager believes will perform better in the economy and applies the bottom-up approach to pick high-potential stocks within those sectors.
The fund manager has the flexibility to invest in a mix of large and mid-cap stocks from various sectors. The allocation between large caps & midcaps broadly depends on the choice of sectors, business environment & valuations. The fund’s core portfolio comprises of 5-6 sectors together, totalling around 50-60% of its assets. Kotak Equity Opportunities Fund follows a buy-and-hold strategy for most of its core holdings, with many stocks being in the portfolio for well over 2 to 3 years.
Graph 2: Top portfolio holdings in Kotak Equity Opportunities Fund
Holding in (%) as of January 31, 2023
(Source: ACE MF)
Kotak Equity Opportunities Fund usually holds a well-diversified portfolio of around 55 to 65 stocks. As of January 31, 2023, the fund held as many as 64 stocks in its portfolio, with the top 10 stocks together constituting around 36.8% of its assets. SBI, ICICI Bank, Axis Bank, L&T, and Reliance Industries currently appear among its top portfolio holdings. Maruti Suzuki, Infosys, Bharat Forge, ITC, and SRF are the other top holdings in the fund’s portfolio. Many of these stocks have been part of the fund’s portfolio for a long time.
In the last two years, SRF, Jindal Steel & Power, Linde India, Bharat Electronics, and ICICI Bank were among the stocks that contributed to the fund’s gains, while it also benefitted from its holdings in Schaeffler India, Cummins India, L&T, Thermax, Infosys, ABB India, and Reliance Industries.
Kotak Equity Opportunities Fund’s portfolio is skewed towards Engineering and Banking & Finance sectors that collectively account for around 44.2% of the portfolio. Auto & Auto Ancillaries, Consumption, Infotech, Pharma, Cement, Petroleum, Fertilisers, and Oil & Gas are among the other core sectors in the fund’s portfolio. Though the fund’s portfolio is inclined more towards Cyclicals and Sensitive sectors, it is fairly diversified to defensive sectors as well.
Kotak Equity Opportunities Fund has been capable of generating market-beating returns for its investors at a reasonable risk. While the fund has managed the downside risk well and stood strong during bearish and highly volatile market phases, it has shown fair performance during positive market trends.
Kotak Equity Opportunities Fund carries an impressive track record under the supervision of Mr Harsha Upadhyaya and has turned out to be a rewarding proposition for its long-term investors. The fund manager has done well to keep overall volatility at a reasonable level and has delivered in terms of risk-adjusted returns. The superior long-term performance of the fund has been driven by its smart sector and stock selection strategy.
Kotak Equity Opportunities Fund is suitable for investors looking for a stable Large & Midcap Fund with an investment horizon of at least 5-7 years.
Note: This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.
This article first appeared on PersonalFN here