The Kotak Multicap Mutual Fund has gained attention for its diversified portfolio, offering exposure to companies across different market capitalizations. It provides flexibility to invest in large-cap, mid-cap, and small-cap stocks, balancing risk and reward. But is it really the best choice for diversified investments?
Let’s take a closer look at its performance, portfolio makeup, and growth prospects for FY 24-25.
An Overview of Kotak Multicap Mutual Fund
The Kotak Multicap Fund is a well-established equity mutual fund known for its broad investment strategy. Launched in September 2021, the fund has consistently delivered competitive returns by tapping into opportunities across various sectors and market caps.
The fund managers actively adjust the portfolio in response to market conditions, ensuring a balanced approach to risk and reward.
In FY25, the fund’s asset under management (AUM) stood at ₹14,541 crore (as of August 31, 2024), reflecting strong investor confidence. With a portfolio that includes blue-chip companies and high-growth mid-cap and small-cap stocks, it aims to capture growth across market cycles.
Is It the Best Fund for Diversification?
Let us see if you should invest in this fund for a diversified portfolio and why.
Return on Investment
When assessing equity funds, performance is critical, and Kotak’s Multicap Fund has consistently proven its resilience.
In FY24, the fund delivered a 19.49% return, outperforming its benchmark Nifty 500 TRI, which posted a 12.3% return. Additionally, the fund has provided an annualized return of 25.46% since inception, making it a strong performer among multicap funds.
Moreover, the fund’s 1-year average rolling return stands at 33.11%, and its Sharpe Ratio of 1.19 indicates an efficient risk-return trade-off compared to its peers which stands at 1.13. This performance showcases the fund’s ability to navigate market volatility and generate steady returns over the long term.
Portfolio Composition
The fund follows a diversified investment approach, with 40-50% exposure to large-cap stocks and the remaining split between mid-caps and small-caps.
In FY25, some of the top holdings included Maruti Suzuki India, Oracle Financial Services, Hero MotoCorp, Mphasis, Zomato, and Hindustan Petroleum Corporation.
These stocks provide a strong foundation for the fund, while investments in high-growth mid-cap companies like LIC Housing Finance and small-cap firms like Navneet Education add a dynamic element to the portfolio.
Sector-wise, the fund is heavily weighted towards IT (11.37%), followed by automobiles (9.75%), and closely followed by banks (9.52%). This diversification across sectors mitigates risks tied to individual industries while allowing the fund to capture broader market trends.
Expense Ratio and Risk Metrics
The expense ratio of Kotak Multicap Mutual Fund stands at 1.65% whereas the category is 1.93%, slightly higher than some peers but justified by its active management style. Higher expense ratios are often seen in funds that actively shift portfolios to adapt to market changes, and in this case, the returns seem to compensate for the costs.
In terms of risk, the fund has a beta of 0.97, indicating that it is slightly more volatile than the broader market which is 0.91. However, the risk is managed through the fund’s diversified holdings, reducing the impact of sector-specific downturns.
Who Should Invest?
Investors looking for balanced equity funds with broad exposure to different market caps may find the Kotak Multicap Equity Fund appealing. Its mix of large, mid, and small-cap stocks provides the potential for steady growth over time, making it suitable for investors with a long-term horizon.
However, this fund may not be ideal for conservative investors due to its exposure to mid and small-cap stocks, which can experience higher volatility. Investors should have a moderate to high-risk appetite to capitalize on the fund’s diverse strategy.
Conclusion
The outlook for the Kotak Multicap Mutual Fund remains promising in FY24-25. India’s economic recovery, coupled with strong corporate earnings, provides a favorable environment for equities. The fund’s exposure to key sectors like financials, technology, and energy positions it well to benefit from these trends. Investors should consider their risk tolerance and financial goals before including this fund in their investment strategy.
Please note: This is not a recommendation, please do your own due diligence before investing.