Fund of Fortnight

This is our mutual fund recommendation. Every fortnight, we recommend one open-ended equity diversified fund that has the best potential of returns for the next one year considering its constituents remain the same.

Kotak Bluechip Fund - Direct Plan

Reason for recommendation The latest macro-economic data does not give us the confidence that we are out of the woods. Inflation is still dictating the equity market and will remain volatile for a while. Though the Indian equity market has remained resilient till now, it makes more sense to become conservative. Having exposure to Large-Caps would serve the purpose. In the large-cap fund category, Kotak Bluechip Fund seems to be the right contender.

The fund has consistently performed better than its category average. The fund’s one year, three-year and five-year rolling returns are better than the category average median rolling returns. Kotak Bluechip Fund has generated 13.9 per cent, 13.6 per cent and 14.7 per cent of rolling return for one, three and five years, respectively, compared to 11.2 per cent, 10.8 per cent and 11.9 per cent return that stood for the category average in the same period.

Such return is not generated by taking extra risk. The risk-adjusted return measure by Sharpe ratio is almost twice the industry average and has remained one of the best in the category. The fund held 57 stocks at the end of July 2022 and manages the concentration risk quite well. Its top 10 holdings form just 45 per cent of the overall portfolio while its top three sectors contribute 52 per cent of the overall assets. On the sectoral front, it is overweight on financial, automobile and services and underweight on energy, consumer staples and materials. Looking at the current valuation matrix of the different sectors, finance and automobile look more attractive and hence are likely to perform better that will help to keep the fund outperform. ICICI Bank and HDFC Bank form the top five holdings of the fund. Looking at historical returns and the current portfolio constituent, the fund is more suitable for moderate to aggressive risk-taking investors.