Large-cap companies are trading close to their historical average, whereas mid caps and small caps are trading at a premium, according to Kotak Mahindra AMC's Harsha Upadhyaya.
The recent positive performance in mid and small caps "cannot continue" and is out of the fund's risk-reward tolerance band, Upadhyaya, CIO-equity, president, Kotak Mahindra AMC, told NDTV Profit.
"Hence, we would prefer a tilt towards large caps," the fund manager, who controls an average of over $12 billion in assets, said.
The fund expects a CAGR of 17% for the Nifty basket in terms of earnings growth in FY24 and FY25, another reason for keeping large caps in focus.
Cash Is A Double-Edged Sword
Upadhyaya—who manages 11 schemes at Kotak Mahindra AMC—said the fund prefers not to keep cash in the portfolio beyond a certain level and allocates it to investments in equities.
"We don't use cash as a tool to manage performance and risk. But compared to large cap-tilted funds, we do have higher cash in mid and small-cap funds. Beyond a certain level, we do not keep cash in our portfolio," he said.
"Cash is a double-edged sword. You will gain if market falls, but lose if it has a sharp rally," he said.
Explaining the portfolio composition, he said the fund keeps a diversified basket of mid and small caps.
Sector-wise, he remains bullish on large-cap banks and industrials, driven by better asset quality and healthy order book, respectively. He remains underweight on FMCG.
Watch the full conversation here:
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