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S. Vaidya Nathan

INVESTORS can contemplate cutting their holdings in the HDFC Growth Fund. The performance of the fund has shown a marked improvement over the last three months. During this period, the NAV has risen about 35 per cent. This is no surprise considering the improvement in equity values, in general, and mid-cap stocks, in particular.

The HDFC Growth Fund has invested in large-cap stocks at the top end of its portfolio. But it has had 30-40 per cent of its assets in mid-cap stocks as well. The rally in the mid-cap stocks has helped perk up the returns over the past year.

The improvement in large-cap stocks over the past four months has helped push the NAV over the face value. Returns since launch are now at about 3 per cent per annum.

The fund has done better than the market. But it has lagged a host of peer equity funds, over the past year as well as since its launch in 2000. Investors may be better off switching to funds with a superior and consistent track record. The choices could include Top 200 Fund and Equity Fund from the HDFC stable (earlier managed by Zurich India), and Prima and Bluechip, from Franklin Templeton.

The run-up in stock prices in the last four months represents a good opportunity to make the switch — either now or preferably by pulling out cash and investing them in a phased manner. The latter would be better as it would enable investors capitalise on any downtrend in the broad market,

Suitability: The HDFC Growth Fund is appropriate for investors with an appetite for risk. The risks associated with the fund are higher than the average diversified fund due to sizeable exposures to mid-cap stocks. The fund has not, so far. delivered the kind of returns that could compensate for higher risk levels.

Portfolio status: The fund has large exposures in bank, engineering and oil and gas sectors. Pharmaceutical stocks, which formed the core of the portfolio along with banking about four months ago, no longer enjoy a similar position. They account for about 5 per cent of net assets now.

The fund has sizeable cash/cash equivalents of about 13 per cent at the end of June 2003. The top holdings are a mix of large-cap stocks, such as SBI.

: HDFC Growth Fund was launched in August 2000. The minimum investment amount is Rs 500. The entry load is 2 per cent. There is no exit load. It has an asset base of Rs 186 crore. The manager is Mr Sanjay Bhattacharya.

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