By Nikhil Agarwal

Copyright indiatimes

AgenciesHowever, we prefer a stock-specific approach over broad sector bets, given valuation concerns in some pockets.

Kotak AMC’s Harsha Upadhyaya isn’t chasing the smallcap frenzy. With over 70% of Kotak Flexicap Fund anchored in largecaps, he believes the best risk-reward still lies in market heavyweights. In a volatile macro, his mantra is conviction, valuation discipline and staying invested where earnings visibility is strongest.Edited excerpts from a chat with Harsha Upadhyaya, President and Chief Investment Officer, Kotak Mahindra Asset Management:Kotak Flexicap Fund has outperformed the benchmark consistently across multiple time frames. What has been the key driver of this alpha generation?Consistent alpha creation over the long term isn’t about chasing momentum. It’s about staying true to fundamentals when the noise gets loud. That’s what we’ve done consistently.The fund’s consistent outperformance stems from a disciplined investment philosophy that emphasizes:Scalable business models with strong capital efficiency.Bottom-up stock selection with a focus on compounding earnings.Valuation discipline, especially during euphoric market phases.Low portfolio turnover, reflecting long-term conviction.This approach has helped the fund navigate multiple market cycles while delivering superior risk-adjusted returns.Live EventsA lumpsum investment in this fund made a year ago would probably have given negative or negligible returns but SIP investors made impressive returns. Although SIPs work across timeframes but in years like this, one does realise its value. Any thoughts on this?Absolutely. SIPs help mitigate timing risk through rupee cost averaging. In volatile or range-bound markets, SIP investors benefit from buying at different price points, which smoothens returns over time. While lump sum investments are more sensitive to entry valuations, SIPs offer discipline and resilience, especially in years like this when headline indices have been flat or negative.SIPs also remind investors that consistency in disciplined investing often beats timing.Large caps still dominate the portfolio with around 72% allocation. Do you see scope to increase mid- and small-cap exposure in the coming quarters, or will you stay cautious given valuations?We don’t chase market cap – we chase conviction. If mid and small caps offer that with valuation comfort, we’ll lean in. Until then, caution is a strategy too.While mid- and small-caps have delivered strong earnings post-COVID, their valuation premium over large-caps has widened. We may consider increasing exposure selectively, but only where earnings visibility and valuation comfort align. For now, large-caps offer better risk-reward, especially in a volatile macro environment.How do you assess the current earnings visibility across sectors? Are there any themes you believe the market is underestimating?Earnings visibility is moderate to strong in sectors like:Financials: Benefiting from macro tailwinds and credit growth.Cement: Supported by industry consolidation, pricing discipline and benign input costs.Telecom & Power: Stable margins and growing domestic demand.Defence: Long-term potential, though valuations are elevated.We believe the market may be underestimating structural fillip to discretionary consumption, especially autos and quick commerce, as GST rationalization and tax cuts could revive demand. The equity market has seen phases of weakness in the recent past. What is your medium-term outlook for Indian equities, and where do you see the best opportunities emerging?India’s story isn’t just cyclical – it’s structural. Volatility may test patience, but the fundamentals continue to reward it.India remains a structural growth story. Despite global headwinds, domestic flows are resilient, and macro indicators—like inflation, crude, and interest rates – are supportive. Over the medium term Indian corporate earnings are likely to move anywhere between low double digits to mid-teens, providing investment opportunities across many sectors of the economy. The fund has maintained a relatively low expense ratio compared to peers. How important is cost efficiency for long-term wealth creation, especially in actively managed funds?Every basis point saved is a basis point earned. In active management, cost efficiency is not optional, it’s a competitive edge.Kotak Flexicap Fund’s expense ratio is among the lowest in its category. Lower costs ensure more of the investor’s capital remains invested, enhancing compounding over time. In actively managed funds, where alpha generation is key, cost discipline complements performance. You’ve been managing the Kotak Flexicap Fund since 2012. How has your investment philosophy evolved over time, especially through different market cycles?Markets change, cycles rotate, but principles endure. Over the years, we’ve refined our lens, but never compromised on clarity.While the core philosophy remains unchanged—focus on scalable businesses, capital efficiency, and valuation discipline – we’ve evolved in sector rotation based on macro trends and greater emphasis on governance. The philosophy has stood the test of time, adapting to cycles without compromising on fundamentals. Given a number of factors like GST, monetary easing, income tax rate cuts and low inflationary pressure, consumption has now become a consensus trade on Dalal Street? How bullish are you and do you think we are at the start of a multi-year cycle for autos and consumer plays?We are constructively bullish on consumption, especially discretionary segments like autos, quick commerce, and select consumer discretionary plays. The recent GST rationalization and tax cuts could boost household spending, improve margins, and revive demand across sectors. However, we prefer a stock-specific approach over broad sector bets, given valuation concerns in some pockets.Add as a Reliable and Trusted News Source Add Now!
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(You can now subscribe to our ETMarkets WhatsApp channel)Read More News onlargecapsKotak AMCHarsha Upadhyayalarge capsinvestment philosophySIPsKotak Flexicap Fund(What’s moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price…moreless

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