After registering a breathtaking gain of 160 per cent in 2003, HSBC Equity was once again up 38.73 per cent in 2004, thus maintaining its top quartile performance for the second successive year. This marvellous performance resulted in HSBC Equity becoming a nearly Rs 1,625-crore fund. However, it hit a rough patch in 2005--with a return of 41.97 per cent, the fund looked an average scheme and investors started to pull back their money. However, we believe this under performance will be short-lived the fund would bounce back.
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 were technology, auto and energy. With this sector combination, HSBC Equity 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. 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.
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.