Excellent performance coupled with low risk have kept this fund ahead of its peers and on top of the charts. It is one of the most compelling options in the category of diversified equity funds
02-Feb-2007 •Research Desk
Since 1995, HDFC Equity has beaten the category average every calendar year, barring 1996.
In 2001, the fund fell by just 2.81 per cent (category average fall was 19 per cent). Since then, it has underperformed the category average in just five quarters and has been a top-quartile performer every year, barring 2004.
A large-cap tilted fund, the allocation averaged at over 70 per cent (2002-03) and around 60 per cent (2004-05). When mid- and small-cap stocks started to lose steam in 2005, the fund manager increased large-cap allocation and consequently, the fund ended 2005 with a return of 62.70 per cent (category average: 46.70 per cent).
Though the portfolio tends to average around 30 stocks, give or take a few, the fund manager does not hesitate to take a big position. The top three sectors account for almost 49 per cent of the portfolio. Though technology has been the most favoured sector this year, automobiles was one of the top sectors but its exposure has been decreasing and basic/engineering is getting priority. Allocation to the energy sector kept dropping but is again on the rise. When the Supreme Court halted PSU disinvestment in September 2003, the fund sold its entire energy holding in October and built a fresh position in March 2004, when PSU stocks started rallying.
Bharti Airtel was bought in January 2004 and sold by June 2004. It reappeared in November and December 2005 portfolios and was again sold. It was bought again in March 2006, sold few months later only to be picked up in September 2006. The fund manager held Infosys for years but sold it in May 2004 and bought it again in October (at higher levels, unfortunately).
As on December 1, 2006, its year-to-date, one-year, two-year and three-year returns were all above category average. Its five-year returns stood at 52.48 per cent (category average: 44 per cent).