• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Aarati Krishnan

HDFC Equity Fund, a diversified equity fund with a consistent five-year record, has continued to notch up a reasonable performance over the past year. It has generated returns that are comparable to that of HSBC Equity, HDFC Top 200 and Franklin India Prima Plus — funds with a similar investment profile.

Its returns, are however, substantially lower than those of HDFC Taxsaver, Birla Equity or HDFC Capital Builder, which have a larger allocation to mid-cap stocks. Investors who own the fund as a part of their core portfolio may continue to hold; fresh investments may be considered in phases.

Suitability: HDFC Equity Fund carries an above-average risk profile by virtue of its investment style and stock preferences. The fund takes focused exposures in its top ten stocks and top sector choices. This makes it vulnerable to any wrong calls by its fund manager with respect to its top holdings.

Despite being a large fund, it does have a significant mid-cap exposure. As of March 2005, a fifth of the portfolio was invested in stocks with a market capitalisation of less than Rs 1,000 crore. This, too, pegs up the risk profile when compared to large-cap focused funds, though it does improve the return potential.

Performance: The fund has been one of a handful to consistently outperform the market over the past five years. But the performance over the past year has been middle-of-the-road, within the universe of diversified equity funds.

Its returns of about 25 per cent compare well with funds such as HSBC Equity, HDFC Top 200 and Franklin India Prima Plus that also invest in a similar mix of large- and mid-cap stocks.

HDFC Equity has continued with its policy of taking focused exposures in its top choices. The top ten stocks, by end March accounted for a sizeable two-thirds of its net assets. These were mainly large-cap stocks such as SBI, Reliance and BHEL.

The portfolio also features marginal exposures in a number of mid-cap stocks such as CMC, Voltas, Indo Rama Synthetics and Avaya Global, which add up to about 20 per cent of the assets.

Investors in the fund should keep a watch on the impact that its swelling size has on performance.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Investment quiz

Copyright © 2005, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line