HDFC Equity Fund: Invest ::Business Line

�� -->

Investors can consider buying the units of HDFC Equity Fund, a fund with more than 15 years’ track record of delivering impressive returns.

The fund contains downsides during market corrections and participates in secular rallies. The scheme’s ten-year compounded annual return of 28.2 per cent and five-year returns of 9.9 per cent outpaced the benchmark, CNX 500, and most other diversified large-cap oriented equity funds.

This fund can be a part of the core portfolio for investors with varying risk appetite looking to stay invested for the long-term of 5-10 years. If you are looking for a predominantly large-cap fund with some mid-cap stocks thrown in, this is the fund for you as it has lower volatility. A monthly investment through this route over the past ten years will have delivered 18.7 per cent annually on your investment.

PORTFOLIO AND STRATEGY

The fund may underperform markets in short phases as it does not jump onto momentum sectors or themes and takes a more fundamental valuation-driven view.

Banks, software and consumer non-durables have mostly been among the top few sectors held by the fund. Their proportion in the portfolio is altered to suit market conditions. In the past one year, the fund has also bet on petroleum products as the sector moves towards de-regulation.

Holding on the some sectors and stocks continuously means that the fund can underperform in short spells, when the portfolio becomes too defensive. Despite its large size, the fund does not take concentrated exposure to individual stocks or sectors, barring a select few.

The fund's top ten equity and equity related holdings account for 45.2 per cent of assets.

The fund is an early participant in the consumer non-durables space. The stocks from this sector have outperformed over the past few years. A classic example is the allocation in ITC, which accounts for almost 5 per cent of the assets. The stock is marking new highs in recent times. Furthermore, defensive sector pharma accounts for 5.5 per cent in the fund’s allocation. Stocks such as Cipla and Lupin that have delivered consistent returns find a place in the portfolio.

The fund is overweight on banks with 22.8 per cent allocation. The banking sector has outpaced the broader market in the 2009-10 bull-run helping the fund generate good returns and outperform. The rally in this sector that commenced in early 2012 is still in progress which can eventually outdo the broader market. The fund has slightly increased its allocation in ICICI Bank stock.

The fund predominantly invests in large-caps (greater than Rs 7,500 crore market capitalisation) with such stocks accounting for 80 per cent of the portfolio. Mid-caps too find a place to the extent of 20 per cent of the portfolio generally.