The Hindu Business Line : Kotak Global India: Hold

Investors can retain their units in Kotak Global India Fund. Its return of 6 per cent over a one-year period ending March 2007 is marginally less than the benchmark S&P CNX 500's 8 per cent. It has, however, delivered superior returns over a three-year time-frame on a monthly, rolling-return and on a compounded basis. The fund has predominantly witnessed a bull market since its launch in January 2004. The May correction and the present market volatility may provide some idea of the company's performance spanning a few market cycles. Investors need to watch its performance across such cycles before considering fresh exposure.

Kotak Global is a theme fund that seeks to invest in Indian companies focusing on international markets for growth and those that are likely to benefit from the increased outsourcing from India. Being a theme fund, the holdings can be more concentrated than diversified equity funds. However, Kotak Global's exposure to sectors, although less diversified, is not as concentrated as some theme funds, which sometimes have 25-40 per cent in a single sector.

Suitability: The objective of benefiting from Indian companies with a global presence may subject the portfolio to external risk factors, such as foreign exchange and growth opportunities in other regions. The strengthening rupee against the dollar is a case in point, especially considering the fund's tilt to the tech sector. However, the stocks in the portfolio may provide some hedge against any domestic slowdown.

Performance: Kotak Mutual changed the benchmark for Kotak Global from Sensex to S&P CNX 500 from January 2007. The new benchmark appears more appropriate as the fund is more broad-based in terms of market capitalisation of its stocks and may not be comparable to the large-cap index.

Kotak Global has returned 38 per cent compounded annually over the last three years and has outperformed both the Sensex and S&P CNX 500 by six and ten percentage points respectively. The fund's return is also on a par with diversified funds such as HSBC India Opportunities, also launched in the same period.

DBS Chola Global Advantage, a fund with a similar theme, has significantly under-performed its benchmark (CNX 500) over the past year although it started off well after its launch in May 2005. Chola's higher exposure to small and mid-cap stocks compared to Kotak Global may have dented the portfolio as a good number of them underperformed the market.

Kotak Global, on the contrary, has held about 50 per cent of its total assets in stocks with a market capitalisation of over Rs 5,000 crore. This has helped it weather volatility better than its peer.

Profile: Capital goods is the fund's top sector holding. Stocks such as ABB and Siemens, although not strictly "Indian", as they are held by foreign parents, have been chosen because they are likely to benefit from outsourcing from India. IT companies in the portfolio including Subex Azure and Sasken Communication fit the fund's objective.

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