Kotak BSE Sensex Index Fund - Direct (G) : NFO Details

The Kotak BSE Sensex Index Fund is an open-ended scheme designed to replicate or track the BSE Sensex Index. Its investment objective is to provide returns corresponding to the total returns of the securities represented in the index, subject to tracking errors. While the fund aims for index-aligned performance, there is no guarantee of achieving its objective. The scheme operates with daily liquidity, allowing subscription and redemption at NAV-based prices. The NAV is disclosed daily on the Kotak Mutual Fund and AMFI websites by 11 p.m. The fund uses the BSE Sensex TRI (Total Return Index) as its benchmark, which is well-suited for comparing the scheme's performance given its replication strategy. Redemption proceeds are dispatched within three working days, and IDCW payments are processed within seven working days from the record date, adhering to SEBI's regulations. In cases of exceptional circumstances, additional timelines may apply as per AMFI guidelines.  

Details of the NFO: Kotak BSE Sensex Index Fund - Direct (G)

Investment Objective and Strategy

Objective:

The investment objective of the scheme is to provide returns that, before expenses, corresponding to the total returns of the securities as represented by the underlying index, subject to tracking errors. However, there is no guarantee or assurance that the investment objective of the scheme will be achieved.

Investment Strategy:

To achieve the investment objective, the scheme will follow passive investment strategy with investments in stocks in the same proportion as in BSE Sensex Index. The investment strategy would revolve around reducing the tracking error through rebalancing of the portfolio, taking into account the change in weights of stocks in the index as well as the incremental collections/redemptions from the Scheme. Such rebalancing shall be done in accordance with timelines prescribed by SEBI from time to time. Index Scheme being a passive investment carries lesser risk as compared to active fund management.

The portfolio follows the index and therefore the level of stock concentration in the portfolio and its volatility would be the same as that of the index, subject to tracking error. Thus, there is no additional element of volatility or stock concentration on account of fund manager decisions A small portion of the net assets will be held as cash or will be invested in debt and money market instruments (as mentioned under asset allocation section)  permitted SEBI/RBI  including  TREPS  or  in  alternative  investment for the TREPS as may be provided by the RBI, to meet the liquidity requirements under the Scheme.

The Scheme may take an exposure to equity derivatives of constituents or index derivatives of the underlying index for short duration when securities of the index are unavailable, insufficient or for rebalancing at the time of change in index or in case of corporate actions, as permitted by SEBI from time to time. 

14 Derivative products are leveraged instruments and can provide disproportionate gains as well as disproportionate losses to the investor. Execution of such strategies depends upon the ability of the fund manager to identify such opportunities. Identification and  execution  of  the  strategies  to  be  pursued  by  the  fund  manager  involve uncertainty and decision of fund manager may not always be profitable. No assurance can be given that the fund manager will be able to identify or execute such strategies. The risks associated with the use of derivatives are different from or possibly greater than, the risks associated with investing directly in securities and other traditional investments.  The Scheme may use SLBM for earning additional income for the scheme with a lesser degree of risk. Scheme may invest in the units of Mutual Fund schemes of Kotak Mahindra Mutual Fund or any other Mutual Funds in terms of the prevailing SEBI (MF) Regulations. The measures mention above is based on current market conditions and may change from time to time based on changes in such conditions, regulatory changes and other relevant factors.

Risk associated with this NFO?

Tracking errors are inherent in any index fund and such errors may cause the schemes to generate returns which are not in line with the performance of the BSE Sensex Index or one or more securities covered by / included in the BSE Sensex Index and may arise from a variety of factors. Delayed realisations, cash for redemptions can result into tracking error, including transactions costs of investments etc.The  Scheme  is  subject  to  the  principal  risks  described  below.  Some  or  all  of  these  risks  may  adversely  affect  Scheme’s NAV trading price, yield, total return and/or its ability to meet its objectives.  

1)The NAV of the units is closely related to the value of stocks that form a part of the benchmark index. The value of this will react to stock market movements and may result in changes in the NAV of units under the scheme. There could also be movements in the scheme’s NAV due to changes in interest rates, macro-economic and political developments and over longer periods during market downturns;

2)Tracking error may have an impact on the performance of the scheme. However, KMAMC will endeavour to minimize the tracking error through regular rebalancing of the portfolio.

3)The  Scheme  is  a  passively  managed  scheme  and  provides  exposure  to  the  benchmark  and  tracking  its  performance and yield. The Schemes performance may be affected by a general price decline in the stock markets. The Scheme invests in the stocks comprising the index regardless of their investment merit. The Mutual Fund does not attempt to take defensive positions in declining markets. 4)As the scheme proposes to invest not less than 95% of the net assets in securities comprising of BSE Sensex Index, any deletion of stocks from or addition to in BSE Sensex Index may require sudden and immediate liquidation or acquisition of such stocks at the prevailing market prices irrespective of whether valuation of stocks is attractive enough. This may not always be in the interest of unitholders.