Kotak Midcap Fund: Is the Turnaround Still on Track?

Fund manager transitions make investors nervous for good reason. A mutual fund's entire personality, which sectors it leans into, how much cash it holds, how quickly it cuts losing positions, often traces back to one person's judgment.

And when that person leaves after 14 years, the fund that emerges on the other side is not guaranteed to resemble the one investors signed up for.

That is roughly what happened at Kotak Midcap Fund.

Pankaj Tibrewal, who had run the scheme (then named Kotak Emerging Equity Fund) for 14 years, ceased to be its fund manager effective 30 November 2023.

Atul Bhole took over on 22 January 2024. In June 2025, Kotak renamed the fund, along with six other schemes across the AMC, from Kotak Emerging Equity Fund to Kotak Midcap Fund, a cosmetic change with no bearing on the mandate.

What Bhole actually did with the portfolio is a more interesting story compared to name change.

Here's what happened...

Kotak Midcap Fund Portfolio: Then and Now

Through the sector run-up into early 2024, Power, Defence, and Capital Goods between them made up roughly 30-32% of the fund's portfolio, a concentration typical of the broad infrastructure and manufacturing rally that dominated midcap investing at the time.

Following the 2024 general election results, Bhole cut that combined exposure down to around 16-17%, trimming it by roughly half, just before these sectors corrected sharply from their highs.

The capital freed up went into two areas most midcap managers were avoiding: IT and healthcare. The fund built a nearly 19% allocation to mid-cap IT names and around 11% to healthcare.

These are well above the typical category averages.

Notably, specific stock calls paid off: Fortis Healthcare gained roughly 81% over the following year, JK Cement around 59%, and Dixon Technologies about 43%.

This was, by any measure, a well-timed and contrarian call. The fund went from third-quartile performance through mid-2024 to top-quartile over the following year.

It is also exactly the kind of call that looks obvious only in hindsight. At the time, buying IT and hospital stocks while everyone else chased capex and defence names required a manager willing to be out of step with the crowd.

How the Numbers Hold-Up Today

The fund's longer-term record reflects that turnaround clearly. The recent numbers are not so great.

Data Source: Value Research, as of 29 September

Over 3 and 5 years, the fund beats both its benchmark and the category average by a comfortable margin. But over 1 month, 3 months, and 1 year, the fund trails the category average, and over 1 year it trails even its benchmark.

Kotak Midcap's Portfolio as it Stands Now

The fund runs 97% invested in equity, with roughly 67.3% in midcaps, 14.8% in smallcaps, and 14.6% in largecaps, comfortably above SEBI's 65% minimum midcap allocation for the category.

Sector-wise, Financial Services has the largest exposure at 25.4%, followed by Industrials at 17%, Consumer Cyclical at 15.1%, Healthcare at 13.1%, Basic Materials at 12.4%, and Technology at 10%.

The IT and healthcare overweights that drove the 2024-25 turnaround are both still present in the current portfolio, scaled back somewhat from their peak.

Fund Snapshot

Source: Kotak Mahindra AMC, Value Research

What This Means for Investors

The fund has a genuinely strong 3 and 5-year record with a fund manager who has already demonstrated he will make large, uncomfortable portfolio changes when the setup calls for it.

Bhole inherited a fund that had drifted into a crowded, cyclical sector bet and rebuilt it around a contrarian, research-driven thesis that worked for roughly two years.

The most recent few quarters suggest that specific thesis has largely played out, IT and healthcare are no longer unloved trades the way they were in mid-2024, and the fund's shorter-term numbers reflect a manager now working without that tailwind.

Whether he has another well-timed rotation left is the open question for anyone deciding whether to add to this fund or not.

Overall, focus on quality and suitability when investing in mutual funds and follow a sensible approach. Be a thoughtful investor.

Happy investing.

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