The Hindu Business Line : Fidelity Equity: Hold

Unitholders can hold Fidelity Equity. The fund has been a strong performer since its launch in May 2005 and is among the top ten performers in the diversified equity category over a one-year period. Over the past year, the fund has delivered a return of about 16 per cent, against a category average of about 4 per cent. Fidelity Equity beat its benchmark, the BSE-200, in 16 of the last 22 months. It has also done well on a risk-adjusted basis. However, the fund's ability to cope with volatility will have to be established over a longer period before an investment is contemplated.

Fidelity Equity invests in a wide basket of stocks without any cap-bias. The Rs 2,500-crore fund does, however, have a large-cap bias, with about 70 per cent of its portfolio invested in stocks with a market-cap of more than Rs 5,000 crore. The portfolio has about 80 stocks, with exposure to no any single stock exceeding five per cent.

The diversified investment strategy is reflected in its sector allocation as well, with the top three sectors accounting for a little more than a third of the portfolio. Holdings in each sector include 7-8 stocks. Fidelity Equity aims to focus on companies that are in an investment phase, that are set to benefit from domestic consumption and those businesses that are internationally scalable. Going by the quarterly and half-yearly disclosures, the fund seems to have consistent investment views.

For instance, the fund has had a bias towards banking since the time of its launch, expecting the sector to benefit from the ongoing capex of Indian companies. In recent times as well, despite fears in the market that hikes in interest rates would hurt profitability, banking continues to be the top sector in its portfolio. While the sector has been under pressure, the bias towards banking does not appear to have adversely affected the fund's one-year return. Some of its top picks, such as ICICI Bank, Yes Bank and Kotak Mahindra Bank, have been out-performers the last year.

Exposure to media stocks has also perked up performance. The fund appears to be more bullish on this sector within the overall consumption theme. Zee Entertainment and Deccan Chronicle are among its prominent holdings.

The fund has been light on commodity/cyclical stocks such as cement and oil. This too, appears to have worked in its favour when compared with peers, especially in the context of the recent meltdown in cement stocks.

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