Latest news with #KotakMutualFund
Time of India
9 hours ago
- Business
- Time of India
Like cricket, new crop of entrepreneurs coming from small towns; focus on domestic stories and bottom-up stock ideas: Nilesh Shah
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads , MD,, says in a fast-paced, unpredictable environment, focusing on the basics is key. Identify companies resilient to global challenges. Look for reasonable valuations and committed management. India's IPO pipeline is strong, with entrepreneurs emerging from smaller towns. This mirrors the evolution of the Indian cricket team. Ignore the noise and focus on long-term growth. Expect some setbacks along the way. Kotak Mutual Fund is optimistic about the domestic consumer discretionary sector, anticipating growth from tax cuts, reduced EMI burdens, and potential GST rationalization. They are prioritizing domestic stories and bottom-up stock ideas, betting on entrepreneurs in sectors with strong growth potential.: Clearly, we need velocity. The government spending is at all-time high and fiscal profligacy has given way to fiscal prudence. We are one of the few countries in the world where the debt to GDP ratio has come down between the subprime crisis and COVID crisis. On the monetary side, we have taken steps on the liquidity as well as the rate cut. Both fiscal and monetary put together are not resulting in any growth acceleration. It is one of the highest in the world, but it is well below our weak spot in this whole thing is private investment . There are multiple reasons why private investment is not on the front foot. One could be that large companies are doing investment, but small companies are not. In many cases, technological disruption is unnerving entrepreneurs to commit capital. In some cases, there is a succession issue. The new generation does not want to do old economy business. We will have to ensure that ease of doing investment is accelerated. We have taken many steps, but we have a long way to Rs 1 lakh crore R&D fund, which the government has announced, is a step in the right direction. If we can leverage that appropriately, then who knows the private sector investment will also pick up. So, the government has taken consumption side steps. We need to revive private this kind of environment where events are fast-paced, unpredictable, it is always back to the basics. There is no way we will be able to predict what President Trump is thinking, what kind of tariff actions will happen. So, it is time to focus on basics, find out companies which are relatively immune from global headwinds, find out companies where valuations are reasonable and management is committed to governance and fortunately in India, there is a long IPO pipeline. There are many entrepreneurs from second and third tier towns and cities coming into the market. It is almost similar to the Indian cricket team. There was a time when the Indian cricket team was dominated by metros. Mumbai, Shivaji Park, contributed probably half of the team. Over a period of time, we have seen tier II and tier III towns and cities cricketers coming and making an same thing is happening in Indian entrepreneurship . There was a time when large business houses dominated the narrative. Now we are seeing entrepreneurs coming from second and third tier towns. So, ignore the noise. Focus on the long-term. Obviously you will have to take one or two hits in this process. It is are under no delusion that we are so smart that we will be able to pick up something which the market has not noticed. The market is much smarter than all of us. The market always teaches us and that is why on my X handle, I say student of the market. I have to constantly remind myself that the market is much smarter than Kotak Mutual Fund, we believe the domestic consumer discretionary story will get supported by tax rate cuts, EMI burden reduction, potential GST rationalisation, or petrol-diesel price cuts and finally the 8th Pay Commission coming into play. This will be across hotels, tourism, airline, home improvement, and all those kinds of sectors are more domestic driven. Some of this money will also be saved and not spent and hence financial services is something one can look at. Clearly, we are more focused on domestic stories than global stories. We are more focused on bottom-up stock ideas and betting entrepreneurs. In many sectors, the growth will still be good though the valuation could be a challenge.
Economic Times
7 days ago
- Business
- Economic Times
Kotak's Rohit Tandon on beating the market with earnings momentum
Kotak Mutual Fund's Rohit Tandon is betting on a different kind of momentum—not price, but profits. In this conversation, the fund manager unpacks the strategy behind the newly launched Kotak Active Momentum Fund, built on earnings upgrades, analyst revisions, and quant muscle ADVERTISEMENT Edited excerpts from a chat: What were the major factors behind launching the Kotak Active Momentum Fund at this particular juncture in the market? Kotak Active Momentum Fund builds up on the Kotak Quant Fund and our endeavour to provide investors with more quant-model based schemes. Markets are a slave to earnings. Time and again, we've seen that stocks selected on the basis of earnings momentum outperform in bull & bear market phases. It's a pattern that's stood the test of time. Kotak Active Momentum Fund provides investors a robust tool —backed by data, driven by fundamentals to participate in momentum of earnings. How does the Enhanced Earnings Factor Model differ from conventional momentum models, and why do you believe it adds value for investors in the current environment? Typically, price momentum investing is a strategy where investors buy stocks whose prices are going up, expecting this trend to continue. However, momentum isn't just about price. Earnings momentum selects stocks based on earnings revisions and analyst ratings, backed by strong fundamentals. By uniquely focusing on the earnings momentum factor, Kotak Active Momentum fund looks at companies whose profits are increasing as a result of analysts upgrading forecasts or companies showing positive earnings surprises. This strategy allows for a more fundamentally grounded momentum approach, aiming to capture sustainable performance rather than short-term price movements. Can you walk us through the backtested results for the model? What are the most important learnings from your analysis of periods of market volatility or sharp corrections? Our proprietary Earnings Momentum model evaluates stock momentum using a combination of earnings growth, sales growth, and analyst ratings. Over a 12-year back-testing period, the model delivered a compound annual growth rate (CAGR) of 24% (net of 2.5% annual transaction costs), significantly outperforming the benchmark return of 16%. In annual back-tests, the model outperformed the index in 8 out of 12 years, with an average excess return of 10% (or 1000 basis points). In the remaining 4 years, it underperformed with an average shortfall of just 4%. This demonstrates that the model's outperformance is not only stronger but also sustained over a longer duration, while periods of underperformance are relatively mild and short-lived. Stress testing the model during challenging market phases—such as the NBFC crisis (Oct 2015–Feb 2016), the COVID-19 market correction (Feb–Mar 2020), and the recent downturn (Oct 2024–Feb 2025)—shows that it performed in line with the benchmark and consistently outperformed traditional price momentum strategies. ADVERTISEMENT How do you balance the need for a systematic, model-based approach with the realities of unpredictable macro events?A systematic investment approach builds portfolios based on a shared characteristic—commonly referred to as a factor. Unlike discretionary fund managers, we do not rely on macroeconomic assessments, stock-picking intuition, or market timing. Instead, our model-driven strategy is grounded in data and rules. Back-testing results demonstrate that this approach has consistently delivered robust outperformance across various market conditions—including business cycles, geopolitical disruptions, and other unpredictable events. This resilience highlights the strength and reliability of a systematic framework in navigating complex market environments. ADVERTISEMENT What type of stocks or sectors do you see as particularly favorable in the coming years, given recent earnings momentum and analyst upgrades? In our discretionary portfolios, we remain constructive on healthcare, consumer durables, and financial services over the medium term. These sectors are closely aligned with the themes of rising consumption and financialization, which we believe offer strong growth potential—particularly if the anticipated uptick in mass premium consumption materializes. ADVERTISEMENT However, the Kotak Active Momentum Fund takes a different approach, focusing on emerging earnings trends that may evolve into structural drivers over the medium term. As a result, sector allocations in the fund can shift significantly with each rebalancing cycle. Currently, the highest-weighted sectors are financials, industrials, and materials. A key insight from our back-testing is that sector weights tend to remain well-distributed, avoiding excessive concentration in any single area. This ensures a balanced exposure while still capturing momentum-driven opportunities. Could you share your views on potential risks for Indian equity markets in the next 12–24 months, and how the fund is equipped to navigate them? Capital markets inherently present both opportunities and risks. In the current environment, marked by global macroeconomic volatility, the foremost concern for investors is the potential economic slowdown. Geopolitical tensions, fuelled by ongoing conflict-related news flows, rank as the second major risk. Thirdly, there are growing apprehensions around technological obsolescence, particularly with the transformative impact of AI across various sectors. Despite these challenges, it's important to recognize that markets move in cycles. Following a period of earnings downgrades, an upgrade cycle can be expected. Our rule-based portfolio construction, grounded in fundamental metrics such as earnings, sales growth, helps mitigate risks by focusing on improving earnings quality. Moreover, when the upgrade cycle begins, the model behind this fund is designed to proactively identify potential areas of earnings improvement allowing it to position ahead of other funds and capitalize on emerging opportunities. ADVERTISEMENT The model uses both price and earnings momentum as inputs. Have there been instances historically where these factors diverge, and how does the fund handle such scenarios? Our in-house model relies exclusively on earnings momentum as its core signal. Since it is built around a single factor, it avoids the complexity of managing trade-offs between multiple signals. Also the model incorporates a range of sub-parameters that enhance its predictive power and improve portfolio selection the model's high churn rate on rebalancing, how do you manage transaction costs and liquidity challenges, especially in less liquid stocks? Quantitative funds must navigate a delicate balance: either risk factor signals becoming outdated due to infrequent rebalancing or incur higher transaction costs from frequent adjustments. Our model is carefully optimized to deliver the best possible performance, taking transaction costs into account. To enhance efficiency, we've incorporated safeguards that exclude illiquid stocks at an early stage of the investment process. Over a 12-year back-testing period, the strategy has maintained an average exposure of 57% to mid-cap stocks and 39% to large-cap stocks. For investors evaluating momentum strategies, what key performance indicators should they watch besides historical returns? It is important for investors to understand the results of the back-tests. Investors should analyze the economic and business cycle conditions present when the fund performed well and use these observations to understand better scenarios when fund performance dipped. Armed with this history, investors will allow investors to endure periods of underwhelming returns. Other than this certain parameters that investors should be conversant with are Sharpe Ratio to understand risk-adjusted performance, maximum drawdown to assess downside risk & turnover ratio to understanding costs. Many investors today are concerned about market valuations. Do you think momentum works across all valuation regimes, or are there times you advise greater caution?Market valuations at an index level are higher than historical average levels and investors should have return expectations lower than what they have observed in the immediate past. At the same time there are opportunities at a stock level in all market regimes. The portfolio created from the earnings momentum is fundamentally sound and has worked across expensive and cheap markets. Finally, what do you believe is the biggest misconception about factor-based and systematic investing among Indian retail investors? Systematic investing does not have much mindshare among domestic investors. Many Indian retail investors mistakenly view factor-based investing as just another stock-picking method. They often underestimate its long-term, rule-based discipline and ignore the role of factor risk premia in performance. There's also a belief that such strategies don't work in Indian markets—despite evidence to the contrary – as indicated by our-backtests. We encourage domestic investors to understand more about systematic funds through their advisors.
Time of India
7 days ago
- Business
- Time of India
Kotak's Rohit Tandon on beating the market with earnings momentum
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Kotak Mutual Fund's Rohit Tandon is betting on a different kind of momentum—not price, but profits . In this conversation, the fund manager unpacks the strategy behind the newly launched Kotak Active Momentum Fund , built on earnings upgrades, analyst revisions, and quant muscleEdited excerpts from a chat:Kotak Active Momentum Fund builds up on the Kotak Quant Fund and our endeavour to provide investors with more quant-model based schemes. Markets are a slave to earnings. Time and again, we've seen that stocks selected on the basis of earnings momentum outperform in bull & bear market phases. It's a pattern that's stood the test of time. Kotak Active Momentum Fund provides investors a robust tool —backed by data, driven by fundamentals to participate in momentum of price momentum investing is a strategy where investors buy stocks whose prices are going up, expecting this trend to continue. However, momentum isn't just about price. Earnings momentum selects stocks based on earnings revisions and analyst ratings, backed by strong fundamentals. By uniquely focusing on the earnings momentum factor, Kotak Active Momentum fund looks at companies whose profits are increasing as a result of analysts upgrading forecasts or companies showing positive earnings surprises. This strategy allows for a more fundamentally grounded momentum approach, aiming to capture sustainable performance rather than short-term price proprietary Earnings Momentum model evaluates stock momentum using a combination of earnings growth, sales growth, and analyst ratings. Over a 12-year back-testing period, the model delivered a compound annual growth rate (CAGR) of 24% (net of 2.5% annual transaction costs), significantly outperforming the benchmark return of 16%. In annual back-tests, the model outperformed the index in 8 out of 12 years, with an average excess return of 10% (or 1000 basis points). In the remaining 4 years, it underperformed with an average shortfall of just 4%. This demonstrates that the model's outperformance is not only stronger but also sustained over a longer duration, while periods of underperformance are relatively mild and short-lived. Stress testing the model during challenging market phases—such as the NBFC crisis (Oct 2015–Feb 2016), the COVID-19 market correction (Feb–Mar 2020), and the recent downturn (Oct 2024–Feb 2025)—shows that it performed in line with the benchmark and consistently outperformed traditional price momentum strategies.A systematic investment approach builds portfolios based on a shared characteristic—commonly referred to as a factor. Unlike discretionary fund managers, we do not rely on macroeconomic assessments, stock-picking intuition, or market timing. Instead, our model-driven strategy is grounded in data and rules. Back-testing results demonstrate that this approach has consistently delivered robust outperformance across various market conditions—including business cycles, geopolitical disruptions, and other unpredictable events. This resilience highlights the strength and reliability of a systematic framework in navigating complex market our discretionary portfolios, we remain constructive on healthcare, consumer durables, and financial services over the medium term. These sectors are closely aligned with the themes of rising consumption and financialization, which we believe offer strong growth potential—particularly if the anticipated uptick in mass premium consumption the Kotak Active Momentum Fund takes a different approach, focusing on emerging earnings trends that may evolve into structural drivers over the medium term. As a result, sector allocations in the fund can shift significantly with each rebalancing cycle. Currently, the highest-weighted sectors are financials, industrials, and materials. A key insight from our back-testing is that sector weights tend to remain well-distributed, avoiding excessive concentration in any single area. This ensures a balanced exposure while still capturing momentum-driven markets inherently present both opportunities and risks. In the current environment, marked by global macroeconomic volatility, the foremost concern for investors is the potential economic slowdown. Geopolitical tensions, fuelled by ongoing conflict-related news flows, rank as the second major risk. Thirdly, there are growing apprehensions around technological obsolescence, particularly with the transformative impact of AI across various sectors. Despite these challenges, it's important to recognize that markets move in cycles. Following a period of earnings downgrades, an upgrade cycle can be expected. Our rule-based portfolio construction, grounded in fundamental metrics such as earnings, sales growth, helps mitigate risks by focusing on improving earnings quality. Moreover, when the upgrade cycle begins, the model behind this fund is designed to proactively identify potential areas of earnings improvement allowing it to position ahead of other funds and capitalize on emerging in-house model relies exclusively on earnings momentum as its core signal. Since it is built around a single factor, it avoids the complexity of managing trade-offs between multiple signals. Also the model incorporates a range of sub-parameters that enhance its predictive power and improve portfolio selection the model's high churn rate on rebalancing, how do you manage transaction costs and liquidity challenges, especially in less liquid stocks?Quantitative funds must navigate a delicate balance: either risk factor signals becoming outdated due to infrequent rebalancing or incur higher transaction costs from frequent adjustments. Our model is carefully optimized to deliver the best possible performance, taking transaction costs into account. To enhance efficiency, we've incorporated safeguards that exclude illiquid stocks at an early stage of the investment process. Over a 12-year back-testing period, the strategy has maintained an average exposure of 57% to mid-cap stocks and 39% to large-cap is important for investors to understand the results of the back-tests. Investors should analyze the economic and business cycle conditions present when the fund performed well and use these observations to understand better scenarios when fund performance dipped. Armed with this history, investors will allow investors to endure periods of underwhelming returns. Other than this certain parameters that investors should be conversant with are Sharpe Ratio to understand risk-adjusted performance, maximum drawdown to assess downside risk & turnover ratio to understanding investors today are concerned about market valuations. Do you think momentum works across all valuation regimes, or are there times you advise greater caution?Market valuations at an index level are higher than historical average levels and investors should have return expectations lower than what they have observed in the immediate the same time there are opportunities at a stock level in all market regimes. The portfolio created from the earnings momentum is fundamentally sound and has worked across expensive and cheap investing does not have much mindshare among domestic investors. Many Indian retail investors mistakenly view factor-based investing as just another stock-picking method. They often underestimate its long-term, rule-based discipline and ignore the role of factor risk premia in performance. There's also a belief that such strategies don't work in Indian markets—despite evidence to the contrary – as indicated by our-backtests. We encourage domestic investors to understand more about systematic funds through their advisors.
Economic Times
01-08-2025
- Business
- Economic Times
Hello Samvat 2072: Kotak MF bets on consumption, cement
Harsha Upadhyaya, CIO (equity) of Kotak Mutual Fund, expects annual corporate earnings growth to rise to 15 per cent-plus in FY17 and beyond. In a pre-Diwali interview with he says the equity market is likely to grow about 15 per cent in the new Samvat. Excerpts:- Samvat 2071 failed to bring cheer to investors. What are your expectations from Samvat 2072? Where do you see Sensex and Nifty by next Diwali? Harsha Upadhyaya: While there has been significant improvement in the macro-economic factors over the last year or so, corporate and business fundamentals have not improved to the same extent due to a sluggish demand scenario and inventory losses due to sharp correction in commodity prices. We expect next year to be much better. With interest rates easing, we may see a gradual pickup in consumption, which could lead to better utilisation of existing capacities and eventually kick off capex plans. The renewed focus on building infrastructure by the government will also start yielding results in the coming years. We are expecting annual corporate earnings growth to move up to 15 per cent-plus in FY17 and beyond. The equity market performance is likely to be broadly in line with the expected earnings growth and could be higher by about 15 per cent over the next year. For minute-by-minute market/stock updates, follow our Twitter handle @ETMarkets What, according to you, are the top five sectoral themes that should work well in Samvat 2072? Harsha Upadhyaya: Urban consumption is likely to be strong going forward, given the drop in interest rates, positive impact of the seventh pay commission and improving corporate wage growth. The auto sector could be a major beneficiary of this trend. Even enablers such as banks focusing on retail business are likely to see better prospects. On the back of renewed government focus on building infrastructure, we expect the cement sector and select stocks from engineering/capital goods space to do well. After rallying over 15% in last one year, will midcaps outshine largecaps this Samvat? Harsha Upadhyaya: Largecaps and midcaps are expected to give similar returns. However, the largecap segment may witness lesser volatility compared with the midcaps, as there has been significant time and value correction in this segment over the last 12-15 months. What are your views on gold? Should investors add more gold this Samvat or equities look like a better alternative? Harsha Upadhyaya: Generally, gold as an asset class does well whenever there is either a scare of inflation or of financial instability. Currently, there is deflationary pressure across the globe. The financial markets are much calmer today compared with what they were a few years ago. Hence, we believe returns on gold could be muted going forward. Equity returns can handsomely beat gold returns over next one year. Also, equities are more tax-efficient. If you are build a portfolio of various asset classes, how much weightage would you give to different asset classes -- equity, fixed income asset, gold, real estate, alternative assets. Equity 60 per cent, Fixed Income 20 per cent, Gold 5 per cent, Real Estate 15 per cent.
Business Recorder
31-07-2025
- Business
- Business Recorder
India 10-year bond yields rise for second month on liquidity withdrawal, rate cut doubts
MUMBAI: Indian government bond yields ended higher for the second consecutive month in July as the central bank ramped up its liquidity withdrawal and dented hopes of another rate cut, adding to investor uncertainty. The yield on the benchmark 10-year bond ended at 6.3735% on Thursday, after closing at 6.3700% on Wednesday. The yield rose 5 basis points in July, after climbing 10 bps last month. The Reserve Bank of India stepped up the use of variable rate reverse repos in July, conducting auctions with higher quantum and shorter durations. The central bank held its first VRRR in June. Constant cash absorption by the RBI has left investors confused about the impact of a larger-than-expected rate cut delivered in June. 'Given the current market dynamics, we are constructive on the long end of the yield curve and recommend a barbell strategy, which is investing in both short-duration and long-duration debt,' said Abhishek Bisen, head of fixed income at Kotak Mutual Fund. India bond yields may inch lower tracking US peers with Fed decision due 'It is a balanced way to navigate an uncertain interest rate environment while optimising risk-adjusted returns.' India's retail inflation dropped to a more than six-year low last month, re-igniting bets that the RBI would cut rates once more in August. This also led to foreign inflows after heavy outflows in the first two-and-a-half months. However, investor hopes were dampened after RBI Governor Sanjay Malhotra said monetary policy will place greater emphasis on the outlook for growth and inflation, rather than their current levels. The bar for further easing is higher than it would have been with an 'accommodative' stance, he added. Rates India's overnight index swap (OIS) rates traded in a narrow range through the month, with the shorter duration ending lower. The one-year OIS rate ended at 5.51%, and the two-year OIS rate finished at 5.47%. The liquid five-year OIS rate ended at 5.73%, a tad higher than at June end.
