Sitting On Cash Is A Double-Edged Sword, Says Kotak Mahindra AMC's Harsha Upadhyaya

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.

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.