Kotak Mutual Fund (MF) has launched the Kotak Business Cycle Fund (KBCF), which will dynamically rotate its portfolio investments into different sectors that can benefit from the current economic business cycle. The New Fund Offering (NFO) will open for subscription on September 7.

According to its theme, the fund invests 80% of its assets in sectors that the fund manager expects to perform well in the current business cycle.

It will combine domestic and global indicators to determine the business cycle’s current phase. During the business cycle, different industries tend to perform well. KBCF will invest in stocks and industries that may benefit from the business cycle the economy is going through.

For example, cyclical companies that are sensitive to interest rates tend to outperform during economic expansions. These include metals, electricity, infrastructure and capital goods. Over the medium term, growth has generally slowed, but sectors such as energy, banking and industrials can continue to perform well. Kotak MF now sees the economy in this cycle.

Sectors such as FMCG, IT and pharmaceuticals that typically generate high free cash flow and cash-rich companies tend to outperform in the late or contracting phases of the economic cycle. Stock selection and industry rotation will depend on the various stages of the business cycle.