Kotak Standard Multicap Fund: Strategizing Growth with Focused Approach

Sep 17, 2020

Market regulator SEBI has caused a stir with the recent announcement of tweak in the characteristics of multi cap funds. Multi cap funds will now have to invest at least 75% of its total assets in equities, with at least 25% exposure each in large cap, mid cap, and small cap stocks.

Most multi cap funds currently hold a large cap biased portfolio which means that these funds will have to undertake large scale portfolio shift to align with the new norms. However, multi cap funds, especially the large-sized ones, may be reluctant to rebalance. These funds may therefore look at the option of merger or change in mandate of scheme.

It remains to be seen what course of action mutual funds decide. Right now they have kept all the options open keeping in mind the fund objective and investors' interest. Investors need to keep a close watch on the portfolio movement and changes in fundamental attributes of their multi-cap schemes over the next few months

Kotak Standard Multicap Fund (KSMF) is the largest scheme in the multi cap fund category that has showcased strong performance over the last few years.

Graph 1: Growth of Rs 10,000 if invested in Kotak Standard Multicap Fund 5 years ago

Kotak Standard Multicap Fund (KSMF) is a multi cap fund that has stood strong across market conditions and has done justice to its investors in terms of generating high alpha. In the last three years, KSMF has more than doubled in its size. It currently has a corpus of around Rs 29,714 crore under its management, which nearly raises concern about its capacity. However, the large cap orientation of the fund still offers it some flexibility to accept more investors. By generating a compounded annualised return of around 10.7% over the past 5 years, KSMF has outpaced its benchmark Nifty 200 – TRI index by a CAGR of over 1 percentage point. Notably the index has appreciated at 9.1% CAGR. An investment of Rs 10,000 in the fund, 5 years back, would have grown to Rs 16,599. A simultaneous investment in the benchmark would now be worth Rs 15,481 over the same time period.

Graph 1
Data as on September 15, 2020
(Source: ACE MF)

Table: Kotak Standard Multicap Fund's performance vis-à-vis category peers

Scheme Name Corpus (Cr.) 1 Year (%) 2 Year (%) 3 Year (%) 5 Year (%) 7 Year (%) Std Dev Sharpe
Parag Parikh Long Term Equity Fund 4,508 24.33 11.98 13.30 14.82 18.25 18.48 0.156
Quant Active Fund 36 31.29 9.88 10.85 13.33 20.53 23.76 0.098
UTI Equity Fund 10,983 17.05 4.40 8.91 10.47 15.25 20.59 0.079
Canara Rob Equity Diver Fund 2,280 16.29 6.89 8.03 10.93 14.32 19.06 0.071
Union Multi Cap Fund 371 13.25 4.43 5.56 8.35 11.56 20.14 0.033
DSP Equity Fund 3,726 8.71 4.75 5.28 10.42 15.95 21.41 0.037
Kotak Standard Multicap Fund 29,714 4.57 2.01 4.15 10.65 17.15 21.12 0.019
LIC MF Multi Cap Fund 295 2.57 0.99 3.84 5.28 9.86 20.20 0.018
SBI Magnum Multicap Fund 9,063 0.76 0.44 2.67 9.73 16.72 20.75 0.000
ICICI Pru Multicap Fund 5,355 -2.10 -4.68 2.02 7.42 13.96 21.81 0.002
Nifty 200 - TRI 5.59 -0.01 4.12 9.12 12.38 21.49 0.053
Returns are point to point and in %, calculated using Direct Plan - Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on September 15, 2020
(Source: ACE MF)
*Please note, this table only represents the best performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.

KSMF stands among the top performers in the multi cap fund category. The fund has shown a stellar performance across time periods and has significantly outperformed its benchmark and many of its category peers in the past. However, in the last one year the fund found itself struggling to keep up with the benchmark and the category average. Nonetheless, over the longer time periods of 5 years and 7 years the fund outperformed the benchmark - Nifty 200 - TRI index by a noticeable margin and has also fared better than its other popular category peers.

KSMF has shown fair level of stability as well. Its standard deviation of 21.12% signifies that the funds volatility has been largely in line with the category average and the benchmark, whereas its risk-adjusted return (Sharpe Ratio) of 0.02 is ahead of many of its peers and in line with the benchmark.

Investment strategy of Kotak Standard Multicap Fund

KSMF was initially launched with a mandate to follow focused investment strategy across few selected sectors. However, post implementation of SEBI classification norms, KSMF was placed under multi-cap funds category, where it is mandated to hold exposure across market caps. The newly defined multi-cap mandate still allows the fund to continue with its strategy of focusing on few chosen sectors, while holding exposure across market caps. Nevertheless in absence of any minimum threshold for exposure to a certain market cap the fund holds a large cap bias where it allocates 70-80% of its assets.

While selecting stocks for KSMF's portfolio the fund manager follows a combination of top down and bottom up approach to stock picking. The focus is on certain sectors that the fund manager believes will perform better in the economy, and applies bottom up approach to pick stocks within the selected sectors. The funds core portfolio comprises of 5-6 sectors together totalling to around 60% of its assets. Even though KSMF follows a focused approach towards few selected sectors, it tries to ensure that the top 10 stocks does not breach the 50% mark.

Graph 2: Top portfolio holdings in Kotak Standard Multicap Fund

Graph 2 Graph 2
Holding in (%) as on August 31, 2020
(Source: ACE MF)

KSMF usually holds a well-diversified portfolio of around 50 to 60 stocks. As on August 31, 2020, the fund held as many as 54 stocks in its portfolio, with top 10 stocks together constituting about 48.8% of its assets. While creating the portfolio, the fund manager limits his picks to not more than 5-6 stocks from a single industry. Top large cap names like Reliance Industries, Infosys, ICICI Bank, HDFC Bank, and TCS currently appear among its top portfolio holdings. Ultratech Cement, HUL, L&T, Axis Bank, SRF, etc. have been among the other core holdings in the fund's portfolio.

In the last one year stocks like Reliance Industries, SRF, Jubilant FoodWorks, Cadila Healthcare, Jindal Steel & Power, Infosys, etc. contributed the most to the fund's gains though stocks like L&T, Axis Bank, Interglobe Aviation, SBI, RBL Bank, GAIL (India), etc. were the laggards in the portfolio.

Around 27.1% of the fund's portfolio is allocated to stocks in the Banking and Financial sector, followed by Consumption, Petroleum, and Infotech. These top 5 sectors together account for around 60% of its assets. Cement, Engineering, Oil & Gas, Auto Ancillaries and Pharma are among the other core sectors in the fund's portfolio.


KSMF carries an impressive track record and has turned out to be a rewarding proposition for its long term investors. The extra-ordinary performance of the fund has been driven by its smart sector and stock selection strategy. While the fund remains heavyweight on cyclicals to ride the market boom and rallies, it also makes well use of defensives during extreme market conditions. This helps the fund perform consistently across market phases.

However, its heavyweight position towards few selected sectors may even result in short term underperformance, if any of its core sector holdings disappoint or is under pressure. Besides, the large size of the fund may become a hurdle in switching focus instantly across sectors. This makes it suitable for investors with high risk appetite and a long term investment horizon of at least 5 years.


Warm Regards,
Divya Grover
Research Analyst


Editor's note: The last few years have not been among the best for equity mutual funds. While most funds have underperformed or are struggling to match the returns of the benchmark, there are few funds that have the potential to constantly generate alpha for its investors. And we have identified five such high alpha generating funds, in our latest report 'The Alpha Funds Report 2020'. Do not miss our latest research finding. Get your access to this exclusive report, right here!

Note: This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

Join Now: PersonalFN is now on Telegram. Join FREE Today to get ‘Daily Wealth Letter’ and Exclusive Updates on Mutual Funds



About the Company including business activity

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.

QIS was promoted by Mr Ajit Dayal with an objective of providing value-based information/views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

'PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name www.personalfn.com for providing information on mutual funds and personal financial planning, financial markets in general, etc. and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.

Quantum Information Services Private Limited (QIS) is registered as Investment Adviser under SEBI (Investment Adviser) Regulations, 2013 and having Registration No.: INA000000680. In terms of the second proviso to Regulation 3 (1) of SEBI (Research Analysts) Regulations, 2014 the Company is not required to obtain Certificate of registration from SEBI.

Disciplinary history

There are no outstanding litigations against the Company, its subsidiaries and its Directors.

Terms and condition on which its offer research report

For the terms and condition for research report click here.

Details of associates

  1. Money Simplified Services Private Limited;

  2. PersonalFN Insurance Services India Private Limited;

  3. Equitymaster Agora Research Private Limited;

  4. Common Sense Living Private Limited;

  5. Quantum Advisors Private Limited;

  6. Quantum Asset Management Company Private Limited;

  7. HelpYourNGO.com India Private Limited;

  8. HelpYourNGO Foundation;

  9. Natural Streets for Performing Arts Foundation;

  10. Primary Real Estate Advisors Private Limited;

  11. HYNGO India Private Limited;

  12. Suresh Lulla;

  13. I V Subramaniam.

Disclosure with regard to ownership and material conflicts of interest
  1. ‘subject company’ is a scheme on which a buy/sell/hold view or target price is given/changed in this Research Report;

  2. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company;

  3. Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report;

  4. Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS (PersonalFN) is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However, any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront / annualized & trail), if any, for any Schemes by QMF to QIS (PersonalFN) is also at arm's length and as per prevailing market practices.

Disclosure with regard to receipt of Compensation
  1. Neither QIS nor it's Associates have received any compensation from the subject Company in the past twelve months;

  2. Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company;

  3. Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company;

  4. Neither QIS nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.

  5. Neither QIS nor it's Associates have received any compensation or other benefits from the subject Company or third party in connection with the research report

General disclosure
  1. The Research Analyst has not served as an officer, director or employee of the subject Company.

  2. QIS or the Research Analyst has not been engaged in market making activity for the subject Company.

Click here to read PersonalFN's Mutual Fund Rating Methodology

Subject Company means Mutual Fund Schemes

Quantum Information Services Private Limited CIN: U65990MH1989PTC054667 Regd. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021 Corp. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021.

Email:info@personalfn.com Website: www.personalfn.com Tel.: 022 61361200 Fax.: 022 61361222 SEBI-registered Investment Adviser. Registration No. INA000000680, SEBI (Investment Advisers) Regulation, 2013

Add Comments