Indian mutual funds have lately been launching schemes which invest in the international markets find growing acceptance in India.
Suraj Saraf
Indian mutual funds have lately been launching schemes which invest in the international markets find growing acceptance in India. However, Kotak Global India is one scheme which should not be confused with these internationally-oriented funds, as it has a portfolio which is fully invested into domestic markets.
The fund manager of this schemes tries to identify export-oriented companies, which have a competitive business model, and has the potential to survive in the global scenario.
The scheme currently has a compact portfolio spread over only 31 stocks, and top 10 holdings account for nearly half the portfolio. The fund manager believes in a buy and hold strategy as it rarely churns its portfolio. The scheme was managed by Sajit Pisharodi since its inception, but changed hands last year, and is currently being managed by Nikunj Doshi and Anurag Jain.
However, there have been no substantial changes in the portfolio structure or investment strategies. Kotak Global India manages a corpus of Rs 122.29 crore, which in the last one year has remained at the same level. However it could not retain the money that it has raised in the initial years, which was in the excess of Rs 300 crore.
The performance of the scheme has not been too impressive, and it has grown at a CAGR of 38.01% since its inception. The scheme is about to complete its fourth year of operation, and has underperformed its benchmark-CNX 500-in most of the timeframe.
On a three year return basis, the scheme has managed to generate returns of 37.37%, as against returns of 42.19% generated by the benchmark. In the near term, the underperformance is even severe, because of the downturn in the performance of export-oriented companies, due to the appreciation in rupee which has impacted the margins.
The two sectors that the scheme had betted upon,. Information Technology and pharmaceuticals, have underperformed the broader markets. The scheme has been forced to trim the exposure in the above sectors, and currently the allocation to IT is only 5.89% of the total net assets, and pharma occupies 5.87% weightage.
The scheme is still holding on to the positions in HCL Technologies, TCS and Mphasis BFL Ltd in the IT space. These sectors have been replaced by oil & gas and refineries (9.49%) and banks (7.71%). Interestingly, banking sector is represented by only ICICI Bank, which is also the top individual holding.
The scheme predominantly invests into big companies with a good track record, and combined exposure to midcap and smallcap stock is only around 18% of the total net assets. Total exposure to giantcap stocks (market capitalisation greater than Rs 25,000 crore) is 44.65% of the portfolio.
The scheme falls into a high risk category despite of having significant exposure to largecap stocks, due to its additional criteria of investing into businesses with significant global presence.
This exposes these companies to greater exchange rate risk, which may have an adverse impact on the returns of the portfolio, as is the case now. Investors will be advised to book profit in this scheme, and invest in international fund separately if they have a tolerance for currency risk, and combine it with a good India dedicated fund.
By arrangement with mutualfundsindia.com, a unit of Icra Online
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