Mutual Funds

Fidelity Equity: Invest

K. Venkatasubramanian | Updated on October 01, 2011

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Investors looking to build a long-term corpus can buy units of Fidelity Equity and make it a part of their core portfolio.

Across market cycles, the fund has consistently outpaced its benchmark and several peers. Over one-, three- and five-year timeframes, it has delivered better returns than the BSE 200, by a sound 6-8 percentage points.

The fund, while ensuring adequate participation in rallies, also contains slide in its NAV during market falls. Over a five-year timeframe, the fund has delivered a compounded annual return of 12.4 per cent, placing it in the top-quartile of diversified funds.

During this period, Fidelity Equity, has performed better than multi-cap funds such as HDFC Premier Multi-Cap and DSPBR Opportunities. Given the fund's large-cap focus, its returns are better than Franklin India Bluechip and Birla Sun Life Frontline Equity.

Given the current market volatility, this may be a good time to hold this fund considering its large-cap focussed portfolio and its strategy of spreading risk thin by holding a large number of stocks.

Taking exposure through the SIP route would help investors ride out volatility.

Portfolio and strategy: The fund remains invested in equity even during depressed markets and moves into cash for not more than 5-10 per cent. This has also allowed it to swiftly deploy funds when the markets turn around.

Fidelity Equity has exposure to mid-cap stocks (less than Rs 7,500 crore market capitalisation) to the extent of 15-16 per cent.

This blend of predominantly large and some mid-cap stocks have meant reasonable participation in market rallies.

The fund has always had banks and software as its top sectors. But exposure to software has been somewhat reduced, reflecting the concerns of slowdown in the developed economies.

The other key sectors that have been held through market cycles include consumer non-durables and pharma — outperforming themes over the last two years.

Petroleum products too figure prominently. But apart from banks, exposure to all other sectors is kept at less than 10 per cent.

The fund has over 60 shares in its portfolio across market cycles, which ensures substantial diversification and also reduces concentration risks significantly.

There is no aggressive churning of stocks, with just eight stocks being exited over the past one year.

These include underperforming companies and those with a challenging business outlook such as SKS Microfinance, IVRCL, Texmaco and Union Bank of India, among others.

Published on October 01, 2011

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