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.

Reason for recommendation

After underperforming for the last few quarters, at present we believe that Small-Caps are likely to outperform Large-Caps as they are available at relatively attractive valuations. Kotak Small-Cap Fund launched in September 2005 remains our preferred bet now from this segment. The fund’s performance has been impressive over the years. Over the long term, it has consistently outperformed its benchmark index, Nifty SmallCap 250 TRI. The fund has delivered a compounded annual return of 16.56 per cent since its inception, which is significantly higher than the benchmark returns of 10.84 per cent. The fund invests in companies across different sectors, being overweight on materials, consumer discretionary, metals and mining and chemicals. The fund’s top holdings include companies such as Carborundum Universal, Ratnamani Metals and Tubes, Cyient, Century Plyboards and Blue Star, among others. It aims to identify high-growth potential companies that are expected to grow at a faster pace than the overall economy. The fund is managed by Pankaj Tibrewal, who has been managing this fund for over two decades having extensive experience of managing equity funds.

The fund also has a strong focus on quality stocks. It invests in companies with proven products and services, above-average earnings growth and has the potential to sustain such growth and stock prices that appear to be undervalued relative to their growth prospects. The fund’s expense ratio is relatively low compared to other small-cap funds in the market, which makes it an attractive investment option for investors looking to invest in small-cap companies with a long-term perspective. However, it’s important to note that small-cap stocks are inherently riskier than large-cap or Mid-Cap stocks. Hence, this makes small-cap funds like Kotak Small Cap Fund more suitable for investors with a higher risk appetite and a longer investment horizon.