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HDFC Mid Cap Opportunities Fund - Making The Right Choices

| 6/6/2011 6:44 PM Monday

It’s almost that time of the year when all of us are keenly gazing at the skies to welcome the rain god not only to get rid of the scorching heat but also to ease the macro-economic pressures such as food inflation and to act as a trigger for the market going forward. In such times, as an investor, it is important to be vigilant in choosing the right investment to help you tide over the rising inflation.

With inflation rates in double digits, it is very important for investors to earn higher inflation adjusted returns to stay ahead of the market.
Looking at HDFC Midcap Opportunities Fund’s performance over the years, if you are an investor with a higher appetite for risk then this fund makes for a good bet to beat the pressure of inflation. The fund has managed to beat the category by a massive 1,312 and 1,157 bps in the one and three-year time horizon respectively. In the one year period it is the best fund in its category, while since its inception it has managed to reward its investors with top quartile returns over all the periods.

It was launched as a close-ended fund in the mid of CY07, though after completing three years it became an open-ended fund. As per the fund’s mandate, it can invest at least 70 per cent of the assets in mid-caps and 5 per cent in the small-cap space, while the remaining 25 per cent can be invested in large stocks, debt and other securities like ADR / GDR, etc. Looking at the fund’s asset allocation strategy, it predominantly looks like a very risky proposition. But the fund has done quite well to negate such a risk by maintaining a diversified portfolio, following a buy and hold strategy and a value approach of investing for most periods.

In April the fund held 55 stocks in its portfolio wherein its top ten stocks’ contribution was restricted to a mere 31.52 per cent, while almost 95 per cent of its assets were invested in the mid and small-cap stocks. Despite such an allocation, the fund has still managed to stay among the top five funds in terms of restricting its investors’ losses on a YTD basis. When the average NAV of the category fell by 11.71 per cent, the fund’s NAV declined by 6.29 per cent. This does sound ironic, isn’t it? Chirag Setalvad has been managing this fund since its inception and at HDFC AMC he also manages six other funds that have managed to beat the category returns by huge margins over the long run.

 

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