Soar­ing Old Eco Stocks give HDFC Funds a Big Boost

Schemes among best per­form­ers clock­ing high re­turns in the rally from March 1

The Economic Times - - Companies -

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.

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