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S. Vaidya Nathan

INVESTMENTS can be considered in the HDFC Equity Fund, which, till six months ago, was the Zurich India Equity Fund, as it continues to be an impressive performer.

The fund's track record over the ongoing bullish phase has been bettered only by a few funds. It has managed to generate returns of about 120 per cent over the past year.

The fund's consistency across different time periods and its degree of out-performance vis-à-vis the broad market over three, five and eight-year periods (the fund was launched in 1995) sets it apart. Only a few other funds, such as Bluechip, Prima and HDFC Tax Saver, can boast of a similar showing spanning a period of over five years.

The fund has generated annual returns of about 40 per cent over the past five years. The NAV (growth option) is Rs 46.4 and that of the dividend option is Rs 19.4.

Suitability: The fund carries a risk level that is normal for a diversified equity fund. The returns have more than adequately compensated for the risk element involved.

The fund has stuck to its strategy of focussing on a small number of sectors and stocks. This cuts the number of correct calls that the fund has to make at different levels — in terms of sector and stock selection, and the timing of buy and sell decisions.

The fund has used this strategy with good effect. HDFC Equity has to figure at the top of the investment options among equity funds. Investors can opt for the dividend option, at least till March 2004, as dividends are exempt from tax.

Portfolio overview: The fund is invested heavily in stocks of banks and diversified companies. The portfolio is a good mix of large and mid-cap stocks. The fund has sizeable holdings in mid-cap stocks such as Indo Rama Synthetics, Crompton Greaves, Cummins India, Vijaya Bank and Gujarat Narmada Valley.

Stocks of information technology, pharmaceuticals and consumer products form a small proportion of the portfolio, which appears to be positioned to capitalise on growth in the industrial economy.

Fund facts: The fund was launched by 20th Century Mutual and acquired by Zurich Mutual, which was acquired by HDFC Mutual earlier this year. The minimum investment amount is Rs 500. The entry load is 2 per cent and there is no exit load. The manager is Mr Prashant Jain.

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