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 Infrastructure and Economic Reform Fund - Standard Plan - Direct Plan 



Reason for recommendation The next leg of growth for Indian economy and the equity market is most likely to come from the capex cycle. The current capacity utilisation at aggregate level is one of the highest in recent years, which means that a meaningful capex cycle is waiting. To reap benefits out of this cycle it is better to invest in an infrastructure fund. Against this backdrop, Kotak Infrastructure and Economic Reform Fund is well-positioned as against other funds in the category. As regards its performance, on a trailing basis this fund has consistently outperformed its category as well as benchmark during most periods. In fact, in the last one month the S and P BSE India Infrastructure TRI declined by 5.69 per cent while the category average stood at negative 1.57 per cent. In the same period, Kotak Infrastructure and Economic Reform Fund gave negative returns of 1.3 per cent. However, although the returns were negative, the fund manged to fall less compared to its benchmark as well as peers. In terms of risk as measured by standard deviation, the fund performed in line with that of the category average. Even in terms of risk-return metrics such as Sharpe and Sortino ratios, this fund shines against its peers. As for its portfolio concentration, despite being a sectoral fund, it has a well-diversified portfolio of 41 stocks with the top 10 stocks forming only 45 per cent of the overall portfolio.

The highest allocation to any individual stock stands at 4.91 per cent. On the sectoral front, this fund is well-diversified into different infrastructure servicing sectors. Nonetheless, it is overweight on industries such as capital goods, materials, metals and mining. It is underweighted on construction, energy and services. Looking at its portfolio, its top holdings include solid stocks such as Ultratech Cement, Larsen and Toubro, Solar, Bharti Airtel, Thermax, and so on. Since it is a sectoral fund, our advice to investors is to make it a part of a satellite portfolio with limited exposure of not more than 5 per cent.