Losing fizz

Edelweiss Diversified Growth Equity Top 100 (Edelweiss DGE Top 100) has done well since its inception in May 2009 and over the past three years. But the fund’s performance over the past one year has not been much to write home about.

With a compounded annual return of about 13 per cent since inception, the fund has done better than the benchmark Nifty (12 per cent) and its category average (11 per cent). But the last year has seen its performance slip with the fund’s return (17 per cent) lagging both the Nifty (18 per cent) and the category average (20 per cent).

In June 2009, when the fund started off, a good 17 per cent of its portfolio was parked in fixed deposits. The deployment to equity was gradual. The market was on the recovery path in May 2009 and the Nifty has gained more than 50 per cent since then — this has helped Edelweiss DGE Top 100 too. Currently, the fund holds just 2 per cent of its portfolio in fixed deposits. mportantly, some of the fund’s picks at inception and thereafter have turned out to be strong winners. For instance, stocks such as Mahindra and Mahindra, Infosys, HDFC Bank and Oracle Financial Services, in which the fund has increased stake since inception, have more than doubled. Also, getting on early into winning sectors such as pharma and IT helped. The fund also did well by bailing out early from losing sectors such as public sector banks, infra, steel and realty.

Over the past three years stocks such as Mahindra and Mahindra Financial, HDFC Bank, TCS, Wipro, Sun Pharma, HCL Technologies and Nestle India have done very well. Fresh picks such as Amara Raja Batteries, Supreme Industries, Bata India, Page Industries and Mindtree have seen their values double, and even quadruple.

Exiting from losing public sector stocks such as SBI, UCO Bank, NTPC and NMDC has also done the fund good. However, paring stake early in Tech Mahindra, which has almost tripled, and getting out early from United Breweries, which has almost doubled, hurt the fund’s returns. Also, scrips such as PFC, REC and Yes Bank in which the fund added stake have lagged the broader market.New buys such as Castrol India and LIC Housing Finance have also underperformed. Premature exit from stocks such as Aurobindo Pharma, which has tripled over the last year, has also hurt the fund.

As of February 2014, software companies have the largest share (19 per cent) in the fund’s portfolio. Over the last year, between 5 – 28 per cent of the portfolio has been deployed in derivative instruments.

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