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S. Vaidya Nathan

INVESTORS in HDFC Growth Fund may remain invested, as the performance of the fund has perked up over the nine months when it has earned a few percentage points more than in-house peer funds such as HDFC Equity and HDFC Top 200 fund. Its long-term track record has also been fairly impressive though the other two funds have a superior performance card.

HDFC Equity has maintained a portfolio that has a balance between mid-cap and large-cap stocks. As of December 2004, mid-caps accounted for about 45 per cent of assets.

This tilt has helped perked returns, as this category of stocks was the star performer last year. Over a three-year period, HDFC Growth has notched an annual return of about 50 per cent.

It has outperformed its benchmark — the Sensex — by a comfortable margin. Even if one factors in large-cap and mid-cap tracking indices to ensure a more meaningful comparison, HDFC Growth sports numbers that point to skilful fund management.

Suitability: The risk profile of the fund is a tad higher than what is associated with diversified equity funds with a large-cap tilt. The exposure to mid-cap stocks raises the risk level. The fund has, however, delivered returns that more than adequately compensate for the higher risk element.

Investors could, however, consider this fund as an option only after exposures in funds such as HDFC Long Term Advantage, HDFC Equity, HDFC Top 200, HSBC Equity, Franklin Bluechip, Templeton India Growth and Franklin Prima.

Investors may opt for the dividend option due to its superior tax efficiency, as payments are exempt from tax.

Portfolio overview: Barring pharmaceuticals, the fund has maintained a modest level of exposure to other sectors.

Pharma accounts for 16 per cent of assets with Ranbaxy and Sun Pharma as the core holdings.

Prominent mid-cap stocks in the portfolio that hold promise over the long term are Sundaram Clayton, Goodlass Nerolac, Thermax, Balrampur Chini, Macmillan and Birla Corp, to name a few.

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