The Hindu Business Line : HSBC Equity Fund: Hold

Unitholders can retain their investments in HSBC Equity Fund, which has just managed to beat the diversified funds average by a percentage point for the past year. Even better, its three-year return is higher than the benchmark BSE-200 by six percentage points. The fund's strategy is to invest across a range of market caps, with preference for medium and large companies. HSBC Equity predominantly invests in large-cap stocks, and 10-15 per cent of the assets are invested in stocks with a market cap of less than Rs 2,000 crore.

Suitability: This fund is suitable for conservative investors willing to take some element of risk, by having a small exposure to mid-cap stocks to boost returns. Since 2004 the fund has restricted its exposure to stocks with a market cap of less than Rs 2,000 crore to less than 20 per cent of the assets under management. This strategy might provide some comfort to conservative investors, but the fund carries risk similar to diversified funds.

Performance: HSBC Equity generated a return of 29 per cent, which is not as impressive as peers Templeton India Growth and DSPML Top 100. These two funds returned 38 per cent and 44 per cent respectively for the past year. TIGF maintains a similar portfolio mix to that of HSBC Equity. During the peak of the market, this fund was overweight on the banking sector, a segment that under-performed the overall market during the past year.

The fund also under-played the capital goods and construction sectors; both of which shot up during the market's bull-phase. This selection of sectors was against the market trend and proved to be a drag on the fund's performance. Otherwise, HSBC Equity trailed its benchmark in only eight out of 24 months. Thanks to the large-cap stocks in the portfolio, the fund bounced back and made good the loss suffered during the market correction. Its portfolio appears well-balanced and has the potential to deliver good returns.

Profile: HSBC Equity has 36 stocks in its portfolio, with the top ten accounting for 45 per cent of the assets. The software sector continued to be the fund's favourite the past year. The fund appears to churn its portfolio and book profits regularly.The fund booked profits in the metals sector, where the exposure was brought down to lowest close to the market's all-time high level. Only a select few stocks, such as ACC, Grasim, M&M, Sterlite Industries and Usha Martin, have been in the portfolio for close to a year.

Fund facts: HSBC Equity was launched in December 2002. It has an asset base of Rs 1,007 crore. Mr Mihir Vora along with Mr Jitendra Sriram replaced Mr Viresh Mehta as the fund manager from July 2006.The minimum investment is Rs 5,000.

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