The Hindu Business Line : HSBC India Opportunities: Hold

Investors can retain their exposure in HSBC India Opportunities Fund. The fund has maintained a steady performance in the two years since launch. It has, however, sailed through a predominantly bull market and is yet to build a track record.

The fund has generated an annualised return of 45 per cent since inception. This performance lags a few other well-established diversified funds. Hence, fresh exposure can be avoided for now.

HSBC India Opportunities invests in stocks across market capitalisations. It has about 60 stocks in its portfolio, with the top ten accounting for about 40 per cent of the net assets.

Over the past six months the fund has reduced concentrated exposures to the top stocks. As of January, holdings in stocks have been restricted to 5 per cent. This may ensure that the downside risk is not high in a volatile market.

After June 2005, the fund has considerably reduced allocation to petroleum products after stocks in the space proved to be under-performers.

Capital goods have, instead, received increased weight. ABG Shipyard, Engineers India and ABB have delivered returns that have helped sustain overall performance. Software and banking continue to be favoured sectors and have weights of 20 per cent and 10 per cent respectively. While Infosys has caused a drag on the performance, secondary software stocks such as Patni Computer Systems and HCL Technologies made up for the sector's lacklustre performance.

Banking and software may, however, be sectors to look out for in 2006, as their valuations appear more attractive after the recent correction. This may have prompted the fund to retain stocks from these sectors in its portfolio.

Performance: HSBC India Opportunities has delivered an absolute return of 54 per cent over the past year and has outperformed HSBC Equity, another scheme from the same fund house. Returns over the last six months have, however, lagged funds such as DSP ML Opportunities and Franklin India Flexi-cap.

Although the fund has the flexibility to invest across market capitalisations, the fund has on most occasions invested about 70 per cent of the assets in stocks with market cap of over Rs 2, 000 crore. This may be another reason why the performance over the past two quarters is superior to funds with a mid-cap bias.

Fund facts: As of January 2006, the fund had an asset base of Rs 465 crore. Mr Viresh Mehta manages this fund, which is benchmarked against the BSE-500.

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