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S. Vaidya Nathan

INVESTORS in HDFC Growth Fund can stay with the fund for now and contemplate paring exposures once the overall market sentiment improves. The fund's performance stacks up well vis-à-vis the broad market. But compared to peer diversified funds over different time periods in the past year, it has not done well.

Investors should look for opportunities to switch to diversified funds with a better and more consistent track record over a longer period. But given the sluggish price trends, it may be better to hold exposures now and await exit opportunities at better price levels.

The HDFC Growth Fund portfolio has a better spread between large-cap and mid-cap stocks now. Close to 45 per cent of net assets are in mid-cap stocks. There could be upside potential in this part of the portfolio when overall market trends rev up. HDFC Growth had a tilt towards large-cap stocks, and still does at the top end of the portfolio.

Its sister scheme - HDFC Tax Plan 2000 - has run a good course on the back of a mid-cap-heavy portfolio. Some of the stocks in this portfolio also formed a small part of HDFC Growth's portfolio. Now the portfolio has a fair sprinkling of mid-cap stocks. Fresh exposures can be avoided as investors could contemplate other diversified schemes with a superior track record.

Suitability: The risk levels associated with HDFC Growth may be slightly higher than the average diversified equity fund due to its sizeable reliance on mid-cap stocks now. The returns so far have not been good enough to compensate for such risks.

Since its launch in August 2000, the fund has turned in negative returns of 5.7 per cent. The market shed 13.5 per cent in the same period. Going forward, if this does not change, investors may be left with modest returns at best.

Portfolio status: The fund has a well-diversified portfolio with pharmaceutical and banking stocks at the forefront. It is a fairly actively managed fund with a portfolio turnover ratio of 56 per cent. The top ten holdings have a mix of large-cap stocks, such as Infosys, Reliance Industries, Ranbaxy and SBI, and mid-cap stocks, such as Asian Paints, Union Bank and Sundram Fasteners.

Fund facts: HDFC Growth Fund was launched in August 2000. The fund offers entry at a load of 2 per cent and exit at NAV. The minimum investment is Rs 500. The net assets are at Rs 156.7 crore. The fund manager is Mr Sanjay Bhattacharya.

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