Kotak Equity Hybrid-Direct: Consistent Returns In Hybrid Space

The Indian equity market is going through rough waters, leaving investors uncertain about whether to choose equity or fixed-income investments. Experts, meanwhile, predict higher volatility and recommend a safer approach.

In this scenario, hybrid funds take centrestage, as they allow investors to benefit from both equity and debt exposure. If you want to ride market volatility, Kotak Equity Hybrid Fund can be a good option. It is one of the oldest schemes in the hybrid equity category with two-and-a-half decade of track record, and has successfully sailed through various market cycles.

Porfolio

The fund follows an aggressive allocation strategy of 75:25 in equity and debt. However, the fund manger ensures adequate diversification across market capitalisation and stocks. As of December 2024, it had 41.81 per cent exposure in large-cap stocks, while mid-cap and small-cap stocks accounted for 34 per cent and 11 per cent, respectively. The fund manager prefers to book profits when he believes a particular sector is overvalued, and other sectors provide better opportunities.

In the past six months, the fund manager has aggressively booked profits from domestic cyclicals, such as capital goods and auto, while increasing exposure to sectors such as technology, chemicals, pharmaceuticals, and healthcare. This rebalancing has worked well in its favour, helping to protect against the downside, while capturing the upside in technology and healthcare sectors.

In terms of debt, the fund manager prefers to stick to high-quality instruments, with the majority deployed in government securities and other high-rated papers.

Performance

The fund has been a consistent performer in the equity-oriented hybrid space. With a return of 17.51 per cent, it has secured the 2nd position in the category on a one-year basis. In the long run, it has rewarded investors handsomely. Over the last seven and 10 years, the fund has delivered returns of 13.99 per cent and 13.55 per cent, respectively.

OLM Take

Given its superior track record, the fund could be a decent choice for investors in the hybrid category.

kundan@outlookindia.com