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If you are looking for a fund that bets mostly on large-caps, does not churn its portfolio too frequently and has a long and sound track record, HDFC Equity would fit your needs perfectly.
The scheme has been around for more than 24 years and has been a steady performer vis-à-vis the broader markets over this period.
It has delivered a solid 18.7 per cent annually since its inception.
Over three-, five- and 10-year time-frames, HDFC Equity has delivered better returns than its benchmark — Nifty 500 TRI.
The extent of outperformance has been to the tune of 1-3 percentage points.
In an environment where most equity schemes have struggled to keep pace with their benchmarks, the scheme’s steady performance is a positive.
To be sure, HDFC Equity does have bouts of underperformance, sometimes for periods lasting for even a year or more.
But it does bounce back, and participates in most market rallies. It has outperformed peers such as DSP Equity, ICICI Prudential Multicap and L&T Equity over the long term.
The scheme is suitable for a long term of 7-10 years and can form an important part of an investor’s portfolio. For investors with a medium risk appetite, taking the SIP (systematic investment plan) route to park sums in the fund will be a good option.
Portfolio and strategy
HDFC Equity has a large-cap bias in choosing the stocks within its portfolio. More than 75 per cent of the stocks at any point in time are from the Sensex, Nifty or BSE 100 baskets.
As the markets had turned volatile over the past one year and mid-caps had crashed, the fund has increased the proportion of large-caps to 85 per cent of its portfolio currently.
Though the fund does not indulge in wholesale churning of its portfolio, it does manage to tweak exposures to sectors to latch on to market-favoured trends. In the last 2-3 years, HDFC Equity has reduced exposure to automobiles and petroleum products, while upping stakes in segments such as software and select private sector banks.
Though the massive exposure, of nearly a third of its portfolio, to the financial segment does hurt during poor cycles, the choice of stocks has kept it relatively insulated.
In the last year or so, the fund’s key holdings have included names such as Reliance Industries, Infosys, Axis Bank, L&T, ITC and HDFC Bank.
HDFC Equity remains fully invested across market cycles. The scheme does not take significant cash positions.
While such a strategy can hurt during heavy corrections, there is a better chance of participation during rallies.
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