The Hindu Business Line : HDFC Equity Fund: Invest

HDFC Equity Fund is a reasonable investment option for risk-averse investors. The fund's three and five-year performance record is impressive, with annual returns over these periods at 41 per cent and 51 per cent respectively. It has performed consistently across market cycles.

The fund is managed in a flexible style; it has few restrictions with regard to investing in large-cap or mid-cap stocks and sports a blend of both. However, the current portfolio has a predominantly large-cap tilt with a small exposure to stocks with a market cap less than Rs 2,500 crore. The returns generated through the systematic investment route appear identical to that of a lump-sum investment over three-year and five-year periods.

Going forward, unitholders should probably expect a more moderate performance. The rally since mid-June has seen a sustained appreciation in large-cap stocks and this has left the valuations of such stocks at relatively high levels. However, since the fund does have an allocation to mid-cap stocks, it has the flexibility to choose its stocks from the entire market-cap range. Investors can opt for the systematic investment plan to avoid the risk of bad timing.

Suitability: Being a consistent performer across market cycles, the fund is ideally suited for an investor with a moderate risk profile who is planning to build a long-term portfolio.

Performance: HDFC Equity's net asset value rose by 38 per cent for the past year and outpaced the benchmark CNX 500. Reliance Vision, which sports a similar market-cap exposure, has generated 41 per cent.

In the past 24 months, though, the fund has trailed the benchmark about seven times, and has trailed continuously over the past five months. The allocations to mid-cap stocks and its sector preferences appear to have played a role in the recent slowdown in performance. Construction and cement sectors, which have performed well for the past year, do not have overweight positions in the portfolio.

Portfolio Overview: The fund tends to hold focussed exposures. The top ten stocks account for 54 per cent of the assets. HDFC Equity has compact portfolio with single stock exposure restricted to 10 per cent. The fund is managed by Mr Prashant Jain.

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