Over the past several weeks, the bulls in the market have taken a halt and most indices have been on a corrective mode. Thanks to a combination of FIIs pulling out more than ₹1 trillion within a month, subdued corporate showing in the results season and the still-high valuations in many pockets of the market, benchmarks declined significantly.
However, large-caps are still not overheated and, with the recent correction, offer a reasonable entry point for investors with a long-term perspective.
For investors with a medium risk appetite, across market cycles, large-caps must form a critical part of the portfolio holdings.
In this regard, investors can consider the Kotak Bluechip Fund (Kotak 50 earlier) for long-term goals that are 7-10 years away.
The fund has a track record of over 25 years, and has delivered healthy benchmark and category-beating returns over the long term.
Taking the SIP route for exposure to the fund would help average costs and reduce portfolio volatility.
Steady outperformance
In a market cap segment where outperforming the benchmark has been challenging for many schemes, the fund has managed to consistently beat the Nifty 100 TRI over the years.
Over the past one-year, three-year, five-year and 10-year timeframes, the fund has delivered 35.7 per cent, 14.9 per cent, 19.1 per cent and 14.6 per cent, respectively, on a point-to-point basis. The scheme outperformed its benchmark by 1-1.5 percentage points across time periods.
When five-year rolling returns over the past 10-year period, October 2014 to October 2024, are considered, the fund has delivered mean returns of 13.5 per cent. For comparison, the Nifty 100 TRI delivered average returns of 13 per cent.
Also, in the aforementioned period, on a 5-year rolling basis, the scheme has beaten its benchmark Nifty 100 TRI nearly 64 per cent of the time. It has delivered more than 12 per cent almost 72 per cent of the time during this period and more than 15 per cent over 36 per cent of the time.
The fund’s SIP returns (XIRR) over the past 10 years are healthy, at 16.6 per cent. An SIP in its benchmark Nifty 100 TRI would have returned 15.7 per cent over the same period.
All return figures pertain to the direct plan of the fund.
Kotak Bluechip Equity fund has an upside capture ratio of 98.3, indicating that its NAV rises almost as much as the benchmark during rallies, though a tad less. But more importantly, it has a downside capture ratio of just 86.4, suggesting that the scheme’s NAV falls much less than the Nifty 100 TRI during corrections. A score of 100 indicates that a fund performs in line with its benchmark. These observations are based on data from October 2021-October 2024.
Stable portfolio
True to its mandate, Kotak Bluechip fund holds 80-85 per cent of its holdings in large-cap stocks. However, the fund takes mid and small-cap exposure to the tune of 15-18 per cent when markets are favourable to derive a kicker to the overall returns.
In recent times, exposure to mid and small-caps have been pared significantly to contain risks.
The exposure in stocks is reserved for the top few companies in any given sector, with very few deviations.
In terms of sector positions, banks, software, petroleum products, automobiles, auto components, FMCG and financial services always figure among the main holdings of the fund. Weightages to segments are tweaked a bit to reflect sector prospects, valuations and the current stage of their cycle.
The fund generally holds around 50-60 stocks in its portfolio. Exposure to individual stocks is less than 5 per cent barring the top few holdings, and is diffused.
In terms of cash and debt calls, the fund usually avoids taking heavy positions. The fund remains invested across most market cycles and cash/debt are restricted to 3-4 per cent of the portfolio.
Overall, it can be said that the fund blends value and GARP (growth at reasonable price) styles in its sector and stock choices.
Kotak Bluechip is well-suited for investors with medium to above-average risk appetite.
Those looking for the long-term of at least seven-plus years can consider the scheme via the systematic investment route for saving towards specific goals.
The scheme can be a part of the core portfolio or a key component as a diversifier in the satellite portion.
