Kotak Mahindra Asset Management Companyis launching the Kotak MNC Fund, an open-ended equity scheme focused on investing in multi-national companies (MNCs). This New Fund Offer (NFO) will be open for subscription from 7th October to 21st October 2024. The fund aims to capture the growth potential of leading multinational companies, offering investors an opportunity to gain exposure to these globally established corporations.
What are Multi-National Companies (MNCs)?
MNCs are companies that operate on a global scale and often have a significant presence across various countries. They are classified into different categories based on their structure and operations:
· Indian MNCs: Indian companies with over 50% revenue or assets from outside India.
· JV with Foreign Companies: Indian firms with foreign entities holding more than 26% shareholding.
· Foreign Subsidiaries: Companies where foreign promoters hold over 50% of shareholding or voting rights.
· Transnational Companies: Firms with over 50% revenue or assets from outside their home country.
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Key Features of the Kotak MNC Fund
Investment Objective
The primary objective of the Kotak MNC Fund is to generate long-term capital appreciation by investing predominantly in equity and equity-related securities of multinational companies. While the fund aims to leverage the strong business models and financials of MNCs, there is no guarantee that the investment objective will be achieved, as market risks are involved.
Why Invest in MNCs?
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Global Reach: MNCs operate in multiple countries, ensuring diverse revenue streams and reducing risk from regional downturns.
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Innovation: With access to cutting-edge technology, MNCs stay competitive and drive sustainable growth.
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Financial Stability: Strong balance sheets and low debt levels make MNCs resilient, especially during economic stress.
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Brand Power: Well-known global brands help MNCs capture market share and maintain customer loyalty.
Nifty MNC Index: Historical Outperformance
The Nifty MNC Index has outperformed broader indices over the long term. From 31st August 2009 to 31st August 2024, it delivered a 16.11% CAGR, compared to 14.18% for Nifty 500 and 13.28% for Nifty 50. A ₹1 lakh investment in Nifty MNC TRI would have grown to ₹9.36 lakhs, while the same investment in Nifty 500 and Nifty 50 would have grown to ₹7.27 lakhs and ₹6.38 lakhs, respectively.
Why Nifty MNC Index Outperforms
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Lower Debt-to-Equity: Minimal debt boosts financial flexibility and reduces risk.
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Global Diversification: Revenue from multiple regions mitigates market-specific risks.
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Operational Efficiency: Advanced technology enables higher margins and better returns.
Who Should Invest in the Kotak MNC Fund?
The Kotak MNC Fund suits investors seeking long-term capital growth with exposure to financially stable, globally present companies. It's ideal for those with high-risk tolerance, a focus on MNCs, and a long-term investment horizon of 5+ years.
Conclusion
The Kotak MNC Fund offers investors exposure to leading MNCs, capitalizing on both domestic and global growth. With its focus on financially strong, innovative, and diversified companies, it's a solid option for long-term equity portfolios. However, investors should assess their risk tolerance and consult a financial advisor before investing.
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