Financial Derivatives And Risk Management

Interim Report
On

Hedging Equity Diversified Portfolio

Submitted In Partial Fulfilment In The Award Of The

Degree 

Masters In Business Administration

Submitted To

Course Faculty: Prof. Dr Kaushik Bhattacharjee

Submitted By

Student Name Enrolment Number

Priyanka Mazumdar (Group-5) 20BSPHH01C0922

                  IBS HYDERABAD, SHANKARAPALLI ROAD, HYDERABAD, TELENGANA

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Kotak Bluechip Fund-Growth
This scheme belongs to fund house Kotak Mahindra Mutual Fund. This scheme was
introduced on 29 December 1998. Earlier name of the fund was Kotak Mahindra 50 unit
scheme, which was renamed to Kotak Bluechip Fund on 25 May 2018.
It is an open ended equity diversified mutual fund that invests in leading companies with
high market capitalization across several sectors. The scheme identifies companies that are
stable compared to broader market and selects stocks based on financial strength of
companies, track record, liquidity, management strategies and reputation. This fund has
given CAGR of 15.33% since last 5 years and CAGR of 15.78% since inception. Fund crisil rank
was changed from 5 to 4 in last quarter.

Source: moneycontrol.com

Investment Objective
This fund aims to achieve capital appreciation from a portfolio rich in equity and equity
related securities of around 50-59 companies. This fund is suitable for investors who want to
invest for minimum 3-4 years and are seeking high returns. At the same time, investors
should be ready for chances of moderate losses in their portfolio.

Fund Details
Benchmark Nifty 50 TRI
AUM Rs 2945.01 Cr
AAUM Rs 2879.76 Cr
Allotment date Dec 29, 1998
Fund Manager Mr Harish Krishan (BE, MBA, CFA)

Key Ratios as on 31 July 2021

Portfolio turnover ratio 21.96%
Standard deviation 21.18%
Beta 0.96
Sharpe ratio 0.56%
Expense ratio (Direct) 0.87%
Expense ratio (Regular) 2.10%

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 Portfolio Weights
Financial Services
Information Technology
Oil and Gas
Consumer goods
Automobile
Construction
Pharmaceuticals
Cement and cement products
Telecom
Consumer services

Portfolio Of The Fund

Sector Portfolio Weight Benchmark weight
Financial Services 30.42% 31.17%
Information Technology 14.93% 17.54%
Oil and Gas 10.42% 11.24%
Consumer goods 10.24% 10.85%
Automobile 5.55% 4.94%
Construction 4.43% 2.83%
Pharmaceuticals 4.08% 3.66%
Cement and cement products 3.48% 2.71%
Telecom 3.13% 1.94%
Consumer services 2.45% 0%
Holdings
Type Percentage
Large cap 79.81
Mid cap 17.53
Small cap 0.59
Others 2.07
Market Capitalization

Large cap Mid cap Small cap Others

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Top 10 Stocks Holding In Portfolio as on 31 July 2021

Source: moneycontrol.com

Inferences From Hedging Equity Portfolio Through Nifty 50 Futures

Hedged vs Unhedged portfolio

30,200,000,000.00
30,000,000,000.00
29,800,000,000.00
29,600,000,000.00
29,400,000,000.00
29,200,000,000.00
29,000,000,000.00
21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21
/ 20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20
1 2 5 6 7 8 9 2 3 4 5 6 9 0 2 3 6 7 8 9
7/ 7/ 7/ 7/ 7/ 7/ 7/ 7/1 7/1 7/1 7/1 7/1 7/1 7/2 7/2 7/2 7/2 7/2 7/2 7/2

Value of unhedged portfolio Value of hedged portfolio

Graph of hedged portfolio is smoother compared to that of unhedged portfolio which

indicates day to day fluctuation in hedged portfolio is less compared to that in unhedged
Portfolio. This is because Nifty 50 futures was used to hedge Kotak fund and both have good
correlation. This is also seen through standard deviation of both portfolios.

Unhedged Portfolio Standard Deviation Unhedged Portfolio Standard Deviation

0.559% 0.1752%

The difference between value of hedged and unhedged portfolio is small i.e Rs
4,46,87,645.00 ( Rs 29,84,86,80,565.97 –Rs 29,80,39,92,920.97) or only 0.15%. Overall in the
month of July 2021, market was bullish. From 1 Jul 2021 to 29 Jul 2021, Nifty 50 futures
increased by 0.43% hence unhedged portfolio AUM increased higher and hedged portfolio
AUM increased lesser. The investor couldn’t gain much in hedging due to his bearish
viewpoint in the month of Jul 2021, when the market was bullish overall. Other transactions
costs involved in hedging also cannot be avoided.

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References
1. https://www.kotakmf.com/Products/funds/equity-funds/Kotak-Bluechip-Fund/Dir-G
2. https://www.moneycontrol.com/mutual-funds/nav/kotak-bluechip-fund-regular-
plan/MKM003
3. https://www.nseindia.com/
4. https://bluechipindia.co.in/MutualFund/MFInner.aspx?id=2

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