The Hindu Business Line : Fidelity Equity Fund: Hold

Unitholders can retain hold Fidelity Equity Fund. The fund’s performance since inception has placed it in the top quartile within diversified funds, though it has under-performed its benchmark BSE-200 over the past year. The fund has done well on a risk-adjusted basis and handled well the volatile phases over the past two years. Its mandate is to invest across the market-cap range.

It is well diversified across sectors with a portfolio of 60-80 stocks. Exposure to any single sector is capped at 25 per cent of the assets. Exposure to any single stock is restricted to less than 5 per cent; though exceptions have been made for stocks such as Reliance Industries.

Suitability: Going by the portfolio and its investment strategy, the fund appears to be conservative and well suited to risk-averse investors. The diversified spread appears to have come in handy during highly volatile market phases, including the recent one.

Portfolio: Despite a flexi-cap mandate, the fund has displayed a consistent large-cap bias over the past year. About 70-75 per cent of the portfolio was invested in large-caps over the past year, despite the various corrective phases throwing up opportunities to invest in mid- and small-cap stocks at low valuation levels.

In recent months, despite the widening valuation gap between large- and mid-caps, mid-cap allocation has remained at about 25 per cent. This large-cap bias may have reduced the fund’s vulnerability to the recent market meltdown. Banking occupies the top slot in the portfolio, with ten stocks representing the sector. ICICI Bank and State Bank of India together form 50 per cent of assets. The IT sector, though an under-performer, remains a key exposure. These contrarian bets may partly explain the fund’s under-performance over the past year.

Infosys, TCS and NIIT were accumulated in the recent correction. The fund was light on construction and power through 2007. This stood it in good stead during the recent market meltdown.

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