Fidelity India Growth Fund - Consistent Performer

Our government expects the economy (GDP) to grow at about 8.6 per cent in the coming fiscal. Though this seems to be a slightly difficult task, taking into account rising inflation and the consequent rise in the cost of borrowing (in the last one year the Reserve Bank of India has raised policy rates eight times wherein the CRR, Repo and Reverse Repo rates have been raised by 25, 175 and 225 bps respectively). Similarly, rising commodity and crude oil prices may act as a speed-breaker. Despite such negatives, however, one may say that the ‘India Growth Story’ is still on! Even after discounting such issues, India with little lower projections will still beat the developed economies and a few of the emerging economies hands down.

So why not invest in a fund that would cash in on the India Growth Story? Fidelity India Growth Fund is one such fund that would not only invest in Indian stocks, but also invest in the Indian companies listed abroad and MNCs benefiting from the Indian economy. The fund made a humble beginning, having been launched just a few months prior to the 2008 meltdown. During CY08 and CY09, the fund managed to stay among the top 15 performing funds of the 56 in this category. CY10 has been a year of extreme outperformance for the fund, when it managed to beat the category returns by over 1,022 bps and occupied the numero uno position among the 56 funds in the category.

True to its name, the fund’s investment style is tilted towards growth stocks. The fund has a provision to go overboard for stock-specific investment calls wherein the fund manager can invest a large part of its asset in a single stock. Currently the fund has 8.40 per cent of its assets invested only in one stock: Reliance Industries. The portfolio of 49 stocks seems fairly concentrated considering the fact that the top 10 holdings accounted for close to 46 per cent and the top three sectors together accounted for as much as 57 per cent of the net asset.

However, the fund manager has made some smart moves to balance the portfolio risk arising from such a style bias and stock and sector concentration by investing in larger companies (over 76 per cent were invested in large-cap stocks). Such a tactical allocation has helped the fund to manage its risk well, considering that the fund has the fifth best Sharpe ratio in its category at 0.24.

Sandeep Kothari has been managing this fund since its inception. This has ensured consistency in the fund’s performance as well as in portfolio allocation. From October 2010 onwards the fund is being co-managed by Anirudh Gopalakrishnan. Sandeep also man-ages three other funds at FIL. All these funds have managed to be in the top performers’ list in their respective categories. Looking at the fund allocation as well as performance, moderate risk investors can take limited exposure to this fund.