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Suresh Krishnamurthy

INVESTORS in HSBC Equity Fund can retain their units as the fund's performance since launch in December 2002 has been impressive. Fresh investments can, however, be considered after evaluating the performance over a longer period.

HSBC Equity Fund has the mandate to invest in a mix of large-cap, mid-cap and small-cap stocks. The fund charges an entry load of 2 per cent for investments below Rs 25 lakh.

Performance: Between its launch and July 2003, the fund registered returns of about 46 per cent, twice the return recorded by the fund's benchmark BSE 200. The performance has been influenced by a higher allocation to mid-cap stocks.

Allocation to mid-cap stocks has been high at about 30 per cent of the net assets of the scheme. The fund also invested in mid-cap stocks, such as IDBI, India Cements, Lupin, Aurobindo Pharma and MTNL — stocks that most other institutional investors have avoided in the past. HSBC's entry into these stocks has been timely and has profited from its investments in such companies.

Portfolio allocation: The assets under management have grown rapidly since launch. From about Rs 35 crore at the end of December 2002, net assets rose to Rs 182 crore at the end of July 2003. The fund has remained fully invested with cash accounting for less than 1 per cent of net assets.

In terms of sectors, the fund has generally remained overweight on the IT sector. In contrast to other equity funds, which maintain allocation to IT at less than 10 per cent, allocation to IT has generally been about 25 per cent. However, the fund's picks in this sector — MphasiS BFL, Hughes Software and HCL Technologies — have worked well for the fund.

The fund has also maintained higher allocation to stocks of public sector companies and Banks. Allocation to stocks of public sector organisations has generally been 25-35 per cent.

Stock picks in this sector, such as ONGC, IOC, MTNL, NALCO, and its investments in banks such as SBI and Oriental Bank of Commerce have paid off.

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