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K.Venkatasubramanian

Investors can retain their units in HDFC Growth Fund, considering its improving performance picture and ability to contain downside during market slumps.

The fund, which has an eight-year track record, delivered a compounded annual return of 22.7 per cent over a five-year period, which is higher than its benchmark and a majority of the funds in the diversified category.

The fund has delivered steady rather than spectacular returns during bull runs in the past few years.

HDFC Growth may be suitable for investors looking for large-cap stocks focussed funds, which may have greater potential to participate in a recovery, ahead of mid or small cap funds.

Performance and Suitability: HDFC Growth has beaten its benchmark Sensex over one-, three- and five-year periods. The sharp market meltdown for most of this year, which has taken a toll on the NAV of some of the best diversified equity funds, has seen a realignment of top performing funds in the diversified category. HDFC Growth now figures among the top few funds in terms of returns delivered over the past few years.

During bull runs, the fund has delivered better than benchmark returns, though not by a huge margin. But it is the downside containment that makes the fund a reasonable holding, given the current market scenario.

Barring the correction in May 2006, the fund has managed to contain downsides better than the Sensex in most other periods, such as those in May 2004, and the protracted market correction from January 2008.

This makes the fund a safer bet for investors with a low-risk appetite who are satisfied with steady returns during bull-runs. Fresh investments may be considered in the form of systematic investment plans, to ride out market volatility.

Portfolio Moves: Over the last six or seven months, the number of stocks in the portfolio has been trimmed from over 50 to a more compact 39 stocks. The fund is predominantly large-cap (over Rs 7,500-crore market capitalisation) focussed, but invests substantially in mid-cap stocks as well (over 25 per cent of portfolio).

Large-cap stocks, with their reasonable earnings visibility and funding capabilities, may recover quicker and earlier than mid-caps.

The number of sectors invested in continues to be 18, making it quite diversified. But the top 10 stocks in the September portfolio contribute to over 50 per cent, with significant exposure to individual blue-chip stocks.

Capital goods and banks, the hot sectors of 2007, have seen substantial reduction in their levels in the portfolio. But they are still among the fund’s top five sectors. ‘Defensive’ sectors (those do not fall as much as other sectors in a broad market fall) such as pharmaceuticals and consumer non-durables are now the top sectors.

Fund Facts: The NAV per unit of the growth option of the fund is Rs 39.94. Mr Srinivas Rao Ravuri manages it.

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