Fidelity India Growth: Invest

Investors looking to diversify their portfolio can consider buying units of Fidelity India Growth. A three-year return of 12.4 per cent places the fund among the top five in the large cap- oriented fund category.

The fund's benchmark BSE 200 managed a mere 3.9 per cent annually over this period.

A sound portfolio of growth stocks of blue chip companies and strategy of holding minimum cash has held the fund in good stead over the 2008 downturn and the ensuing rally.

Suitability : Fidelity India Growth is suitable for investors looking to add to their existing portfolio of funds. Given the fund's growth tilt, it cannot be expected to contain declines too well.

However, the diversification strategy typically adopted by funds in the Fidelity stable has contained falls during down-phases of the market. SIP would be a sound way to invest in this fund.

A 22 per cent return compounded annually post the fund's launch versus a 7 per cent lump sum return speaks of the volatility that is characteristic of growth funds.

Performance : For a fund launched in September 2007, a 7 per cent compounded annual return may seem unimpressive. However, the fund was in the top quartile of the diversified fund performance chart over the above period, suggesting that mutual funds as a category have not convincingly bounced back from the slowdown.

From the March 2009 lows though, it it generated absolute return of 160 per cent, placing it among the top large-cap funds.

Fidelity India Growth has demonstrated consistency since its inception. A one-year rolling return analysis since its launch suggests that the fund managed to outperform its benchmark a good 90 per cent of the times. Among other large-cap focussed funds, Fidelity India Growth has lagged only HDFC Top 200, both over a one- and three-year period. The underperformance, though, is restricted to 1-2 percentage points.

Distinguishing features : Fidelity India Growth's portfolio is not too different from another strong performer from the same stable – Fidelity Equity. There are, however, a few differentiating features between the two funds.

One, Fidelity India Growth has expressly stated that it would look at growth stocks that are also leaders in their space. Fidelity Equity does not make this distinction and invests across value and growth stocks.

Two, Fidelity India Growth can invest up to 10 per cent of its net assets in foreign equities. However, the fund has not so far exercised this option; even as late 2010 did afford opportunities to invest in international blue chips.

Three, the fund holds fewer stocks when compared with Fidelity Equity. While Fidelity India Growth's performance mimics Fidelity Equity, the latter would be a better option in a core portfolio, given its longer track record.

Laden with a portfolio of 45-50 stocks, the fund is heavy on sectors such as bank and software. It has cut down on its holdings in consumer non-durables, construction projects as well as ferrous metal over a one-year period.

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