Mutual Funds

HDFC Top 200: Comeback, thanks to cyclicals

Nalinakanthi V | Updated on January 16, 2018 Published on October 09, 2016


Stocks in the banking, financial and energy segments have boosted performance

After a modest show in 2015, HDFC Top 200 has made a comeback. The fund’s performance has seen a turnaround in the last few months. From the January 2016 lows, the fund has delivered almost 28 per cent gains in the last eight months; this is nearly 6 percentage points more than its benchmark, S&P BSE 200 Index.

The fund’s cyclical bets, which dragged its performance last year, have begun to play out. The sharp jump in stocks of banks, financials and energy over the last three months has provided a leg-up to the scheme’s performance. These stocks have gained 20-50 per cent since June this year. This includes stocks such as Power Finance Corporation (46 per cent gains), Rural Electrification Corporation (37 per cent), Indian Oil Corporation (31 per cent), Canara Bank (28 per cent), YES Bank (23 per cent), L&T Finance Holdings (23 per cent), India Bulls Housing Ltd (22 per cent) and Punjab National Bank (20 per cent).

Historically, the fund has been adept at containing downside well during market falls. For instance, during the January 2008-March 2009, the fund managed to curb the NAV decline at less than 55 per cent even as the benchmark BSE 200 Index lost nearly 65 per cent. Likewise, during the November 2010-December 2011 period also, the fund lost around 26 per cent. This was lower than the 28 per cent slide in the BSE 200 Index.

During the relief rallies that followed corrective phases, the scheme has managed to deliver returns higher than its benchmark. Consider the September 2013-March 2015 period, for instance. The fund raked in 92 per cent gains during this period, over 15 percentage points higher than the benchmark (76 per cent).

Good for the long haul

Being one of the marquee funds in the large-cap space, the fund has delivered over 20 per cent annually since its inception in 1996. Though the fund has had short bouts of underperformance, it has managed to deliver healthy gains over the long term. Besides performance, the fund’s expense ratio of 2.05 per cent is lower than that of most funds within the category, which has also aided returns.

Given that the scheme has a moderate slant towards value stocks, it may be best to stay invested for a longer period for certain bets to pay off. Hence, investors with a minimum investment horizon of five years can consider systematic investment in this scheme.

The scheme had 65 stocks in its portfolio as on August 31, thereby minimising concentration risk. In the last three months, the fund has bought stocks of companies in the financials space.

Published on October 09, 2016
This article is closed for comments.
Please Email the Editor