The Hindu Business Line : HDFC Growth: Hold

Investors in HDFC Growth can stay invested. The fund was doing well in early 2006 just before the broad market decline. The recent correction, however, has again hit the performance. HDFC Growth's portfolio, however, inspires confidence that may well warrant a hold strategy for long-term investors.

The fund has exposure to a mix of large- and mid-cap stocks. The fund trailed its benchmark for the past year by nine percentage points. Of the last 12 months it trailed the Sensex in nine. It, however, outpaced the BSE-500 by four percentage points over this period.

The recent meltdown in mid-cap stocks could have impacted the NAV. If this is your only mutual fund investment, you could consider switching to a fund with a large-cap bias, such as HDFC Top 200 for a balanced profile.

HDFC Growth carries a higher risk profile as it has a 20-25 per cent exposure to mid-cap stocks with a market cap of less than Rs 2,500 crore. Any sharp swing in the market may dampen returns. A conservative investor should, therefore, limit exposure to the fund.

Performance: The fund returned 37 per cent over the past year. Its performance for the three-year and five-year periods outpaced its benchmark Sensex. In the same period HDFC Top 200 and HDFC Equity performed impressively, returning 55 per cent and 50 per cent respectively.

However, Sundaram Growth Fund, with a similar investment strategy, notched up returns in line with HDFC Growth.

Interestingly, the returns generated for the past year through the systematic investment plans of HDFC Growth were far superior to HDFC Top 200.

The portfolio turnover of the fund is far lower than other funds from the HDFC house. More active portfolio churning over the last bull rally may have yielded better returns for the fund.

Portfolio Overview: The top ten holdings accounted for 52 per cent of the assets. HDFC Growth has 30 stocks to its portfolio.

The top three sectors — consumer non-durables, capital goods and software — account for 43 per cent of the assets.

In the large-cap space, stocks such as Reliance Industries, BHEL and Infosys Technologies continue in the fund's portfolio for over six months now.

Fund facts: HDFC Growth Fund was launched in September 2000 and is managed by Mr Srinivasa Rao Ravuri. The asset size was Rs 285 crore as of June 2006.

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