The Hindu Business Line : HDFC Growth: Sell

In the last three quarters of 2004, its performance appeared to be to showing substantial improvement. It even managed to post gains of a few percentage points more than the NAV as compared to HDFC Equity and HDFC Top 200. However, thereafter, it has failed to capitalise on the bullish undertone in equities.

It has had exposures to several mid-cap and emerging large-cap stocks.

Even the large-cap stocks such as ONGC, SBI, Hindustan Lever and Tata Tea that figure in the portfolio have posted healthy gains. These have, however, not translated into the performance of HDFC Growth Fund, indicating an indifferent investment strategy.

The entry and exit strategies appear to have taken a toll on performance. Even a relatively small asset base of about Rs 275 crore, which should have facilitated a superior performance, has not helped the cause.

In this backdrop, we downgrade our view of the fund. Investors could exit it so that they can capitalise on the present level of stock prices.

Suitability: The risks associated with HDFC Growth are higher than one would associate with typical diversified funds. It has not provided returns to justify the higher risk element. Even over a longer period such as three years, the fund trails a host of equity funds.

Portfolio overview: The fund continues to prefer the pharmaceutical sector, though its weight in the portfolio has been scaled down from January this year.

Pharma stocks have been laggards, and this, to an extent, explains the fund's lacklustre showing.

Its other sector preferences, such as banking, engineering and diversified companies, should have more than adequately compensated for this but that has not been the case.

The emerging large-cap stocks, such as Bharat Electronics, Crompton Greaves, Balrampur Chini and Goodlass Nerolac, to name a few, have not bolstered the NAV.

Fund facts: HDFC Growth was launched in July 2000. The minimum amount is Rs 5,000. The entry load is 2.25 per cent. There is no exit load.

The fund manager is Mr Tushar Pradhan.

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