HDFC Balanced Fund: Invest

Investments can be considered in the units of HDFC Balanced Fund through the systematic investment route. HDFC Balanced Fund, an equity-oriented balanced fund, emerged as the top performer in its category over a five-year period.

It returned 13.1 per cent annually over this period as against 6.4 per cent increase in its benchmark CRISIL Balanced Fund index.

Suitability

HDFC Balanced Fund is suitable for investors who do not wish to hold a portfolio of only equities.

While the equity market return will help it deliver strong return over a long-term, the debt portfolio which typically accounts for 30-40 per cent of the assets, helps limit the downside.

For instance, during the decline from November 2010 highs to December 2011, the NAV fell by 15 per cent (not annualised) as compared with the 32 per cent fall seen in BSE 500 index and 21 per cent loss seen by HDFC Prudence.

While the fund contained the downside better than its peers during the market declines, it cannot be expected to hold to positive ground during volatile markets.

It can, at best, contain declines better than a pure equity fund.

Given the volatility in equity markets and the high interest rate scenario in the debt market, investors will do well to adopt the SIP route to average rupee costs during volatility.

Performance and portfolio

The fund delivered a return of 2 per cent in the last one year while the bellwether index S&P CNX Nifty lost 10 per cent.

The fund's buy-and-hold strategy in longer duration corporate debt portfolio, coupled with rebalancing of the equity portfolio from time-to-time, allowed it to perform better.

Investment calls taken by the fund in early 2011 to increase its holdings in certificate of deposits worked in its favour.

It was also quick in paring its exposure to these short-term instruments by April 2012 by exiting these deposits. The fund managed to have equity exposure of anywhere between 66 per cent and 71 per cent in the last one year.

In equities, it has a multi-cap portfolio with the exposure to large-cap stocks rising during the last one year.

The portfolio is diversified with no stock accounting for more than 2.7 per cent of the total portfolio. The fund holds at least 46 stocks in its portfolio.

Investments in stocks such as VST, Bata India and Balkrishna Industries have all delivered robust returns for the fund.

During the last one year, the fund increased its exposure to the banking sector as the valuations bottomed during November and December periods.

It made some value picks by buying/increasing holdings in ICICI Bank and SBI. Software was another major sector in which the fund invested more money than a year ago.

On the other hand, the fund reduced exposure to the pharma sector which had been a relative outperformer. Exposure to telecom (Bharti Airtel) was also pared as the stock valuations peaked in February.

Given the improved performance, the fund assets under management went up from around Rs 148 crore in March 2010 to Rs 555 crore for the quarter ended March 2012.

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