Financial Daily from THE HINDU group of publications
Sunday, Nov 21, 2004
Financial Daily from THE HINDU group of publications Sunday, Nov 21, 2004 |
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Investment World
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Mutual Funds Markets - Mutual Funds HDFC Capital Builder: Hold Aarati Krishnan
The fund's one-year return of about 65 per cent beats that of diversified equity funds such as HDFC Top 200 Fund and HDFC Tax Saver comfortably. These funds, however, have a better long-term track record than the Capital Builder fund. Investors can stay with the fund. Those contemplating fresh exposures may take these in small doses, as Capital Builder, in its new avatar, is yet to prove itself across a complete market cycle. The fund, which earlier selected stocks from "defensive" sectors such as FMCG, pharmaceuticals and automobiles in a bid to minimise downside risk, has switched completely to cyclical stocks, with a strong small/mid-cap bias. The focus now seems to be on selecting small-cap or mid-cap stocks with good growth potential and no particular sectoral leanings. Suitability: The distinct small/mid-cap bias in HDFC Capital Builder's portfolio pegs up its risk profile considerably in relation to funds that stick mainly to frontline and bluechip stocks. As of October, the fund had close to 40 per cent of its assets deployed in stocks with a market cap of less than Rs 1,000 crore. Though these stocks carry high return potential, they come with relatively low liquidity and a fairly large dose of day-to-day volatility in prices. However, the fund has done a reasonable job of containing this risk, by taking such exposures in very small proportions. Performance: The performance over the past year, with returns of about 65 per cent, has placed the Capital Builder Fund ahead of chart-toppers such as the Franklin Prima Fund, HSBC Taxsaver and HSBC Equity Fund. This can probably be traced to the choice of stocks, which leans heavily towards mid-cap and small-cap stocks, that were at the forefront of the rally. Despite an adventurous approach to stock selection, Capital Builder has churned its portfolio at relatively low frequency.
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