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Quality Conscious

Search for quality portfolio that delivers consistently should end here. This fund has everything that one looks for in a core fund

HDFC Top 200 concentrates primarily on India's top 200 companies by market capitalisation and hence offers a portfolio consisting large-cap, blue chip and highly liquid stocks. The fund tends to be aggressive and thus generate some extra returns through active stock and sector specific calls - something you should always expect from fund manager Prashant Jain under whom the fund has flourished since 2002.

Here, the top holdings largely remain concentrated with the allocation to the largest holding regularly crossing 8 per cent of the total assets. At the sector level, the fund manager generally parks half of the assets under management in three sectors. The portfolio always remains tilted towards one sector -Prashant Jain regularly commits more than one-fifth of the money to one sector, often technology. This tends to increase the volatility with the fund's standard deviation remaining in the upper circuit of the equity funds' category.

Having said that, he attempts to attain diversification through spreading the rest of the portfolio across sectors and around 50 stocks.

In 1999, the fund had a huge exposure to FMCG and pharma sectors. This led to underperformance during the tech dominated rally. By the time it decided to switch to tech stocks, the rally was over. In 2000, the fund parked a third of its corpus in technology stocks, which resulted in the fund losing more than the category average as tech stocks fell. In 2001, the situation improved and the fund lost much less than the category. A high exposure to the FMCG sector helped the fund avoid disaster. Since then, the fund has performed well to consistently deliver above average returns. In 2004, it performed in line with the category average as mid-caps were the major performers and HDFC Top 200 - with its large-cap bias -was unable to do as well as its peers.

In recent times, technology has once again become the top holding of the fund. Additionally, the fund manager has increased exposure to energy, metal and pharma stocks. With stress on quality, mid- and small-cap stocks have never accounted for a sizeable part of the portfolio. However, the fund manager's around 20 per cent exposure to them has yielded good results. His long-term mid-cap picks, such as Crompton Greaves, GlaxoSmithKline Consumer Healthcare, Britannia, OBC, Pidilite Industries (stock he exited in March 2006) etc, have turned multi-baggers.