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Summary: Once stuck in the third quartile, Kotak Midcap Fund is now back to where it belongs: among the top performers in its category. What changed? From contrarian IT bets to well-timed sector exits, fund manager Atul Bhole’s quiet conviction paid off. We break down the four smart moves that powered this Rs 57,000-crore fund’s turnaround, and which stocks helped the fund to get back into the big league in the last 12 months.
Until mid-2024, Kotak Midcap Fund was sitting in the third quartile on a three-year performance basis. Fast-forward to today, and it finds itself in the top quartile over the past one year and delivering the fourth-highest returns in its category. With a four-star rating from Value Research and over Rs 57,000 crore in assets, this turnaround deserves a deeper look.
So, what changed?
We break down the four key reasons why this fund, managed by Atul Bhole, has outpaced most of its peers in recent months.
1. No panic cash calls and smart redeployment
In a year where many mid- and small-cap fund managers turned cautious, Bhole didn’t succumb to the ‘expensive market’ narrative.
“Despite everyone calling the market expensive, we did not take any significant cash calls,” he says.
While the fund had held some cash earlier, Bhole strategically deployed it as opportunities emerged, and those bets paid off. Unlike peers who waited on the sidelines, Kotak Midcap remained nearly fully invested, allowing it to ride the rally instead of missing it.
2. Timely sector rotation
The turning point came right after the 2024 general elections.
Between June and July 2024, sectors like Power, Defence and Capital Goods were the toast of the market, and Kotak Midcap had a hefty 30-32 per cent exposure to them. But Bhole didn't hold on too long, telling Value Research: “We trimmed positions quite aggressively, reducing exposure to around 16-17 per cent.”
At a time when many funds were increasing bets on these sectors, Bhole was booking profits. And rightly so, many of these stocks corrected sharply in the months that followed.
3. Contrarian bets on mid-cap IT and Hospitals
Where did the capital go? Into sectors few were looking at mid-2024: IT mid caps and Hospitals. Bhole rotated capital into these lagging pockets. In short, by exiting Power, Defence and Capital Goods before their correction and pivoting to IT and Hospitals, the fund not only protected downside but also participated in the subsequent rally. A rare double win.
As per the latest portfolio disclosure, the fund has invested nearly 19 per cent of its assets in Technology stocks (the average mid-cap fund exposure is 11.56 per cent) and nearly 11 per cent in Healthcare.
4. Individual stock picks delivered alpha
While sectoral rotation was key, stock selection also contributed meaningfully.
“Apart from that, there were three to four individual stock-specific calls that also played out well for us,” Bhole says.
He didn’t disclose names, but our analysis of June’s portfolio shows that Fortis Healthcare (81 per cent growth in the last 12 months), JK Cement (59 per cent up), Bharti Hexacon (55 per cent), Coromandel International (50 per cent), Max Healthcare (48 per cent) and Dixon Technologies (43 per cent) have done the heavy lifting.
The last word
Kotak Midcap has around 55 per cent exposure to true mid caps, with Bhole’s investment ethos placing a huge emphasis on the quality of the promoter or the management of the company because he believes that “what makes the difference is the strategy and execution by the management”.
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Also read: Top mid-cap fund in the last 10 years? Bet you missed it
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