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Strong Growth Opportunity - HDFC Equity Fund

| 7/18/2011 5:29 PM Monday

Does a systematic investment plan in a good equity fund win over a Bank fixed deposit?  Yes, it surely does - provided you are willing to take a slightly higher risk and stay invested in the fund for a longer period. To elucidate, if you had invested in an SIP of HDFC Equity fund that was incepted in December 1994 (one of the oldest funds in the MF industry), it would have earned you a staggering return of over 23 per cent on a compounded basis since then. No Bank’s FD would have even come close to such a performance!

Having said that, the fund, like many other funds, has seen its share of ups and downs. It didn’t do too well in CY06 and CY07, while in 2008 the fund delivered a muted performance wherein it marginally managed to restrain losses as compared to most in its category. In 2009 and 2010, the fund has performed well and has made a smart comeback, putting up a top quartile performance. Also, in the one and three year periods, it has outpaced the category (multicap funds) by 723 bps and 1005 bps. Its performance has helped it attract investors’ attention, which is visible in the rise in its AUM to Rs 9220.20 crore at the end of June 2011.

Prashant Jain, one of the best fund managers that the Indian MF industry has seen, has been managing this fund since June 2003. Since August 2010, he has been co-managing this fund with Miten Lathia. Prashant has been associated with the AMC and the fund for a long period, which is good for any fund, rendering stability and consistency to the investment style and the performance of the fund. He also manages four other funds at HDFC and all of these funds have managed to remain ahead of their respective categories over the longer horizon.

It is a multicap fund that currently (as per the June 2011 portfolio holding) has a large cap bias, with around 68 per cent of its net assets invested in such stocks. The fund seeks to invest in stocks that offer a blend of value and growth. Over 97 per cent of its assets are invested in 66 equity stocks, wherein the top ten holdings accounted for almost 43 per cent of its net asset. This gives the zest of diversification to the funds portfolio, though the fund has taken a concentrated sectoral call,wherein the top three sectors contributed over 57 per cent of the net asset.

Looking at all the attributes, if you are a moderate risk investor, this fund can be made part of your core portfolio.

 

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