This two-year old baby has matured rapidly to give strong competition to its peers. After registering a breathtaking gain of 160 per cent in 2003, HSBC Equity is once again up 38.73 per cent in 2004, thus maintaining its top quartile performance for the second successive year. This marvellous performance has resulted in HSBC Equity becoming a nearly Rs 1,625-crore fund--the third biggest diversified equity fund of India.
The fund follows a top-down approach and takes sector calls. Within the sector, it carefully picks stocks with strong fundamentals. Almost half of its returns come from sector calls and the rest can be attributed to prudent stock selection. It has a preference for medium and large companies.
Through 2004, the fund's favourite sectors have been technology, auto and energy, together accounting for half of the portfolio.
With this sector combination, HSBC Equity has proved its mettle in both bad and good times in 2004. During the initial dull phase of 2004 (January-May), the fund's loss of 18 per cent was lower than the average peers' loss of 23 per cent. And when the market took off post-June 2004, it gained 38 per cent till mid-November beating more than half the funds in the category. Though the recent rally is not confined to any select sector, the fund has made smart gains.
In 2003, its hot favourite was the technology sector. The fund manager does not hesitate to invest in sectors even when its peers are not doing so. It increased its holding in Infosys just ahead of its September 2003 results, expecting the stock to do well and benefited. But the fund was cautious in the banking sector, and missed the rally of 2003. Investments in auto stocks like Mahindra & Mahindra and Tata Motors also proved profitable. Both the stocks appreciated handsomely that year. In the April 2003-January 2004 bull market, the fund generated a return of 182 per cent outperforming its benchmark, the BSE 200, which rose by 131 per cent in the same period.
HSBC Equity Fund has been able to deliver a strong performance in its short existence. This should please most of the large-cap lovers. If it continues to do so for long, it could well emerge as one of the great investment stories for Indian equity investors.
This article was originally published on March 02, 2005.
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