HDFC Top 100: A veteran of large-caps

The top performer has delivered 17% returns in the past one year

Those looking to invest in a pure large-cap fund can buy units of HDFC Top 100, a veteran in the category with an impressive track record. The fund has steadily outperformed its benchmark, Nifty 100 (Total Return Index), across all time-frames (one- three- and five-year periods). Over the past 10 years, it has clocked a compounded annual return of 13.7 per cent.

Moreover, beating the benchmark by a huge margin of 8 percentage points, HDFC Top 100 has delivered 17 per cent returns in the past one year, making it the best performer in the large-cap equity diversified funds category. The scheme has also outshone its peers such as Aditya Birla Sun Life Frontline Equity, Reliance Large Cap and Axis Bluechip over the past year.

Being a veteran, the fund has seen many market cycles. Following lacklustre performances in 2015 and 2016, it managed to revive in 2017.

Even after a subdued 2018, it has delivered 11.7 per cent so far this year, led by a strong show put up by large-cap stocks. Investors with a conservative approach can opt the systematic investment plan (SIP) route to mitigate market volatility. The fund could be part of the core portfolio of investors seeking good long-term returns.

Strategy and portfolio

After riding the pharma and FMCG stocks’ rally for many years, the scheme shifted its focus to corporate banks, industrials, utilities and IT in 2017. The fund is currently overweight on these sectors which have the potential to stage a recovery in earnings. On the other hand, it is underweight on FMCG and auto sectors which have rich valuations and weak demand growth. The scheme fully invests in equities and rarely takes cash calls when the markets are in a corrective phase.

The top preferred sectors for HDFC Top 100 are banks, software and petroleum products, comprising 56.6 per cent of the portfolio. The top five stocks have 37.4 per cent weightage in the portfolio. The scheme predominately invests in large-cap stocks.

The portfolio is well diversified across key sectors. Apart from the top 10 stock holdings, the other individual holdings make up less than 4 per cent of the portfolio.

Also, the scheme has a low portfolio turnover, indicating a long-term approach in stock selection. It has about 50 stocks in its basket.

The fund recently added Sun Pharmaceutical Industries, BHEL and Grasim Industries, and exited Avenue Supermarts.

A strong rally in stocks such as ICICI Bank, SBI and Reliance Industries has helped the scheme deliver good one-year returns.

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