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K. Venkatasubramanian

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Investors can retain the units of HSBC Advantage India Fund considering its improving performance vis-À-vis its benchmark BSE-200 and the dominance of blue-chip large-cap stocks in its portfolio. The portfolio comprises of over 25 per cent investment in medium and small-cap stocks (less than Rs 7,500-crore market cap).

The fund has a track record of a little over two years and seeks to invest in ‘hot’ themes in the Indian growth story.

Suitability and performance: The fund may be suitable for investors with a high-risk appetite looking for a fund that straddles market-caps and benefit from any broader market rally therein. On a two-year time-frame the fund has lagged its benchmark, but its one-year returns have matched it. It has also equalled the performance of diversified funds with a large-cap bias, such as HDFC Top 200 and DSPML Top 100 equity.

With its focus on blue-chip stocks the fund may benefit in the event of a bounce-back from a volatile to a possible bull phase as such stocks participate more in such phases. With the broader market taking a stiff beating in the first 3-4 months of 2008, mid-cap stocks were among the worst affected.

As a result, valuations may be attractive, generating a possible buying interest in select stocks. Investors with a low-risk appetite may, however, consider switching to HSBC Equity Fund considering its longer track record and focussed large-cap bias. The fund has significant exposures to sectors that are consumption and infrastructure development related and may pan out well over the long term.

Strategy: Though the fund’s objective may sound thematic, it is fairly diversified, with 20 sectors represented across 40 stocks.

Banks, construction and petroleum are the top sectors held. But concentrated exposure has been avoided, with the top three sectors each having an exposure of around 11 per cent of the portfolio.

This makes it less risky than thematic funds focussed on infrastructure themes heavy on power, construction, and so on. Stock exposure is also not concentrated and a large-cap domination ensures lower impact costs and better liquidity during trading.

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