VR Logo

HDFC Equity Still A Good Investment

HDFC Equity has a history that makes it a good long-term investment, says Dhirendra Kumar on CNBC TV18

Dhirendra Kumar, CEO of Value Research, in an interview with CNBC TV18.

How should one structure a good SIP?
There is a far greater awareness about SIPs, that this is one way to keep your anxiety in check and it is a methodological way of investing. I think the common understanding is that the more the better. I had received a query from an investor - he is investing Rs 80,000 a month by way of SIP into 24 funds, which is way too much. I don’t think having too many of them adds any value. Of course, you have taken into the whole concept and it is a good idea, ensure that it is a long-term money as you rightly said that your investment should be at least for a full market cycle and the longer the better.

More importantly, having a particular number of them and how often to review it is important because a lot of investors think that you have done your SIP and now think over it at what periodicity one should review one’s portfolio at what point one should actually change track. How often to review this, how injurious it could be, how tax efficient it will be.

So do a periodic review, ideally every year, while you should just try to keep a sense of what you are investing in and see that it is still on tracks and still has all the reasons for which it was bought in the first place.

Which is the best fund from the Reliance stable?
The most attractive fund from the Reliance Fund family today is Reliance Growth. It has a long history; it has a superior-risk adjusted performance over a long period of time it is a fairly broad spread fund.

With respect to its recent performance, should one remain invested in HDFC Equity Fund?
HDFC Equity remains a very good fund but its recent past has not been very good. Even the last leg of the bull-run also was not very good for the fund but this is not a fund that one should write off right now because it is a fund with a long history. Here is a fund, which has a very long history, and the same fund manager even prevails now. So there is a reason to continue the performance with a lot of experience and this is the time when I am expecting that this fund will actually stand up and it has been able to modestly guard the downside much better.

So the long run creditability of a great performance was put to test and investors are getting impatient, but I think that is getting repaid for now.

Should one exit from Tata Indo Global Infra Fund?
It is a relatively new fund and after two months of its inception, the market slipped. It is the fund which invests about 65 per cent into domestic infrastructure companies and can invest up to 35 per cent into other markets and that in money is invested through the Invesco Asia Infrastructure fund as of last month and only 16 per cent of its money was invested abroad through another fund of Invesco.

So if the investor has invested for 3-5 years, I don’t think there is much to worry. Of course this is a closed end fund; so my understanding is that he should have invested for term of the fund and if he has any near term expectations, he wanted his Rs 20,000 to go up and he can actually take his money back; there is disappointment in store for him because the fund is down about 25 per cent since its launch in the past 10 months and I don’t see that he will be able to recover speedily in near future but in 3-5 years time horizon, I am hopeful that the market will turn around and there is a normal cyclicality to it and these kinds of funds. Infrastructure funds still hold promise over time.

What are your views on ULIPs?
ULIPs are a very bad idea and financially injurious too. A couple of reasons for that, one is that it’s expensive, the other is that investors don’t get insurance or investment with clarity. It’s a bad idea to mix insurance and investment. Insurance is a more important need than investment, growing your money efficiently. By mixing the two you don’t get either of them properly and besides that, your need for insurance actually changes more radically with time.

For a person who is single, he gets married; his need for insurance goes up overnight. As you are able to accumulate your savings, it gradually comes down. The moment you have a dependent, it goes up again in between. After that, once you have accumulated your savings it comes down. Hence, getting into a long term commitment to save a defined amount at an early age is not advisable. And besides that, I don’t think ULIP is an efficient investment going by the cost framework, liquidity, the transparency of it. I think a mutual fund is a far superior vehicle and so ULIP is fundamentally a bad idea.