Kotak Mahindra Mutual Fund has launched an equity fund which, it claims, would be managed in a "contrarion manner". Named as Kotak Contra, the fund's IPO opened yesterday and would continue till July 1, 2005.
The AMC has conceived the fund on the premise that short-term prices of stocks are influenced more by market sentiment. This can sometimes lead to under-valuation of companies that are fundamentally strong. Kotak Contra will take advantage of the opportunities that this short-term mis-pricing creates.
Speaking to Value Research, Anand Shah, who would be managing the fund, said adding contrarion investing to a growth or value portfolio would lead to better diversification. He said the fund had low monetary risk, as investments would primarily be in undervalued stocks at the lower end of the valuation. He, however, added that the fund might have time risk, as it could take longer for the markets to recognise undervalued stocks.
On liquidity, Shah added that the fund had a provision to allocate up to 35 per cent of the assets to money market instruments and in normal circumstances have more liquid assets than an average diversified equity fund.