This fund's ability to change with time has resulted in top quartile performance year after year. Being one of the most versatile equity funds, HDFC Equity merits a place as a core holding in any portfolio
31-Aug-2005 •Research Desk
HDFC Equity is the only diversified equity fund that has outperformed the category average return every year for the last seven years. Top quartile performances in four of the last five years with average volatility makes this fund suitable as a core holding.
HDFC Equity is one of the most versatile funds available to the Indian investor. Its ability to change with times is responsible for a great show even in bear markets. It changes its colours well ahead of market trends.
The fund moves in and out of performing sectors. For example, when the Supreme Court halted PSU disinvestment in September 2003, the fund sold its entire oil sector holding of 9 per cent. It built a fresh position again in March 2004 when PSU stocks started rallying.
Another example is the way the fund has increased its exposure to mid-cap stocks. Against an average 75 per cent of large-caps in the past, mid- and small-cap stocks have occupied nearly half of the fund's portfolio in recent months. With this mix of mid- and large-caps, HDFC Equity delivered a top-half return of 27.53 per cent in 2004.
From the beginning of the year till August 30, 2005, the fund has gained 27.32 per cent against the average diversified equity fund's 26.56 per cent. Picks like ONGC, Maruti, BHEL, Crompton Greaves, Century Textiles, Reliance Industries, Voltas and TV 18 have been rewarding.
The fund was unlucky with Infosys last year. It sold Infosys in May 2004 and bought it again at higher levels in October. During this period, the stock gained nearly 70 per cent. This year, it has collected some decent gains in the stock. Fund manager Prashant Jain does not hesitate to take big positions in a sector if he is convinced, as has been the case with technology sector. Its top three sectors-technology, automobile and financial services-account for more than 53 per cent of the portfolio, and technology alone accounts for 20 per cent.
The fund manager also takes some aggressive stock specific calls. For example, allocation to only five stocks has often crossed 40 per cent mark in the last two years. SBI, Infosys, Satyam Computer, Grasim Industries, ONGC and Reliance Industries have been some of the favourite stocks of HDFC Equity.