After a fairly uneventful 2004 and 2005, HDFC Growth beat the category average by 10 percentage points in 2006. It continued to beat the category average in 2007 and fell considerably less than the category average in 2008.
This spurt in performance from 2006 onwards can be credited to the new fund manager who took over in April 2006. Savvy sector selection has been a testament to the fund manager's skills.
In 2007, the fund was into healthcare and engineering while its peers were into metals. As the category as a whole increased exposure to diversified companies, this fund moved out of it altogether. A similar pattern followed in 2008 when it maintained an average allocation of 13 per cent and 14 per cent in the healthcare and engineering sectors respectively. During the year, the fund was also heavy on the defensive FMCG sector stocks with 12 per cent allocated to it. Better sector choice along with a high cash allocation and large-cap tilt helped it curtail its losses in the year to 48 per cent while the category shed 55 per cent.
But in the first quarter of 2009, the fund shed 7 per cent (category: -3%). Also, in the bull phase (09/03/2009-30/06/2009) that followed, it lagged the category by a marginal 2 per cent.
The fund has a typical style of increasing exposure to particular stocks or sectors in a systematic and phased manner by building positions slowly.
The fund was inconsistent in terms of performance. But that has changed. Though it has suffered a setback recently, it does have the ability to deliver superior long-term returns. And with a comfortable diversification across 40 stocks coupled with buy-and-hold as the preferred strategy, it has emerged as one of the preferred choices.