Mutual Funds

HDFC Capital Builder: Invest

K Venkatasubramanian | Updated on June 18, 2011

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Investors can buy the units of HDFC Capital Builder Fund, given its track record of delivering sound returns over the long-term. The fund has consistently done better than its benchmark — CNX 500, over one-, three- and five-year time-frames.

Over a five-year period, HDFC Capital Builder has delivered a compounded annual return of 20.2 per cent, which places it among the top quartile of funds in the diversified category. Returns outpace beaten peers such as DSPBR Opportunities and Tata Opportunities, while marginally lagging UTI Opportunities.

The fund follows a ‘multi-cap' strategy in stock selection, with allocation to mid-cap stocks (less than Rs 7,500 crore market capitalisation) to the tune of 25-30 per cent of the portfolio. This makes the fund suitable for investors with an above-average risk appetite. Investors may also consider taking the SIP (systematic investment plan) route to taking exposure to the fund and ride out volatility.

Performance and portfolio: In the market rallies of 2007 and 2009-10, the fund outperformed the CNX 500 index, riding on with the right blend of mid- and large-cap stocks. During the early 2007 correction and in the protracted fall of 2008-09, HDFC Capital has managed to contain downsides better than its benchmark.

The fund has chosen the right sectors over the past few years which has aided in its performance.

Banks, software, consumer non-durables and pharma have been the key sectors invested in over the last 2-2.5 years. These sectors led the rally from the March 2009 lows, with several stocks being multi-baggers, and thus helped the fund participate. Incidentally, from mid 2009, the fund also added automobiles and auto ancillaries, which have delivered substantial outperformance.

The fund also reduced exposure to sectors such as capital goods from 2009 itself. In recent months, HDFC Capital has increased exposure to petroleum and oil & gas sectors. The fund has always had a compact portfolio of 35-38 stocks, with individual stocks rarely accounting for anything more than 5-6 per cent of the total assets.

Published on June 18, 2011

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