Soaring Old Eco Stocks give HDFC Funds a Big Boost
Schemes among best performers clocking high returns in the rally from March 1
Mumbai: Schemes from HDFC MutualFundmanagedbyPrashant Jain have been amongst the best performers, clocking high returns in the rally that began March 1. HDFC Equity Fund, which manages ₹ 14,375 crore, is up 18.03% and is amongst the top gainers in the multi-cap category. HDFC Top 200, which manages ₹ 11,718 crore, is up 17.3%, the top gainer in the large-cap fund category. HDFC Prudence, an equity-oriented balanced fund, is up 14.4% during the same period. In comparison, the Nifty has gained only 12%.
Though the time period taken into account is short, the rally in these schemescomesasasighof relief for the investors, especially after last year’s under-performance and the slide in the rankings.
“HDFC funds have historically shown to pick up pace and outperform in prolonged bull rallies. They typically make up for past underperformance in such rallies,” says Vidya Bala, head of research at Fundsindia.com.
As per data from Value Research, HDFC Top 200’s trailing one year return is -9.52%, its three-year return is 13.36%, compared to its benchmark BSE 200 which is down 6.97% and up 12.80% in the same periods. For HDFC Equity Fund, the one-year trailing return is -11.27%, for three-year period it is 15.193% compared to its benchmark Nifty 500 which is down 6.43% and up 13.58% in the same periods.
This poor performance led to a sharp dip in AUMs of the schemes over the last 15 months. HDFC Top 200’s AUM fell from ₹ 14,416 crore in January 2015 to ₹ 10,403 crore in February 2016, while HDFC Equity Funds’ AUM fell from ₹ 19,100 crore in February 2015 to ₹ 12,590 crore in February 2016.
“One of the main reasons for underperformanceof HDFCfundshas been its exposure of close to 15% to PSU banks,” says Renu Pothen, head of research at ifast Financial.
Thefundhasclosetoa12-15%exposure to PSU banks with another 10% to corporate banks like Axis Bank and ICICI Bank. Its exposure to L&T Funds managed by Prashant Jain have been star performers is 6.3% and 4% to metals. Over the last one year SBI is down 34%, ICICI down23%andL&Tlost30%.
In the past one-and-a-half months, however, things have changed. Infosys is up 14.7% since February 29, ICICI Bank up 25.34%, HDFC Bank 12.75%, SBI 18.2% and L&T has gained 17.1%.
Can the fund catch up and continue with its stellar performance going ahead? For March 2016, the top five picks of HDFC Equity Fund are Infosys, SBI, ICICI Bank, Larsen & Toubro and HDFC Bank. “The
STAGING A COMEBACK
strong point about Prashant Jain is that he sticks to his conviction and does not change his strategy midway,” says Kaustubh Belapurkar, head of research at Morningstar India. Infosys which is his top pick has already posted better than expected results and is the No 1 holding in HDFC Equity Fund.
“The banking sector is the biggest financier of the capex that is essential to revive the economy and put it back on the growth track,” adds Renu Pothen. She, however, believes that PSU banks will turn around soon, as the government looks to revive growth in infrastructure. With inflation down, currency stable and interest rates on a downward trajectory margins should improve which will lead to higher corporate earnings.