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S. Vaidya Nathan

AN investment can be considered in HDFC Equity Fund, as its strategy could deliver attractive returns.

The fund, which used to focus on large-cap stocks, has shifted tack and now invests in the mid-cap space too. This has helped it sustain its performance, which has been impressive for several years now.

This shift in strategy has also led to a greater degree of portfolio diversification. The top ten exposures now account for about 45 per cent of assets — sizeable decline from even a few months ago, when it formed more than 60 per cent. In sector composition, too, the portfolio is now more diversified.

Over the past year, the NAV has gained about 65 per cent. The fund has comfortably outpaced benchmark indices as well several peer funds. Even if one considers mid-cap funds, the fund figures high in rankings over the past year.

Investors could, however, used a systematic investment plan and phase out their exposures over a six-month period or a year. This would enable them to capitalise on any weakness in the broad market. Such a strategy has usually paid rich dividends in funds that have performed as consistently as HDFC Equity has.

Suitability: The risks associated with HDFC Equity Fund are in line with what one would expect of diversified funds. The investment strategy, with the enhanced focus on mid-cap stocks, does peg the risk level higher than what one would associated with fund.

But it has delivered returns that are attractive and compensate more than adequately for the risk element. Investors could opt for the dividend option and also for re-investment. HDFC Equity should be a core part of a portfolio of funds.

Portfolio overview: The fund's stock selection in the mid-cap space has led to attractive pay-offs. Stocks such as Amtek Auto, United Phoshorus, Television Eighteen, Savita Chemicals and Alstom are prominent examples.

Large-cap stocks dominate the top ten holdings, with Amtek Auto as the only odd one in the pack.

The fund has invested about 40 per cent of its assets in mid-cap stocks.

The preferred sectors are information technology and engineering, and this stance holds promise, especially over the next twelve months.

Fund facts: HDFC Equity Fund was launched in December 1994. The minimum investment amount is Rs 5,000.

The entry load is 2.25 per cent, and there is no exit load. Mr Prashant Jain is the fund manager.

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