Mutual Fund - HSBC Equity Fund : Analysis

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HSBC Equity Fund, which seeks to invest predominantly in large caps, has completed five years since inception and has consistently outperformed its benchmark — the BSE 200 — over one, three and five-year periods. Like many diversified funds, HSBC Equity has invested in about 30 stocks, making it a compact fund to monitor.

A look at the fund over the six-month period, May to November, reveals that the fund's corpus has increased by 39.7 per cent to Rs 1,385 crore, while the NAV has improved by 42.8 per cent to Rs 107.24.

Sector Moves: The sectors included appear diversified with a few 'in' theme sectors and some contrarian themes, with fair growth prospects.

Banking (12.6 per cent), a sector that has done very well over the past year, is the top sector in the portfolio. In construction, another high-growth sector, exposures have been doubled over the six-month period and stand at 8.3 per cent. Cement sector exposures have been hiked. Interestingly, consumer non-durables sector — FMCG is a newly added sector and amongst the top holdings (5.6 per cent) for the fund. The bet here may be that consumption-related themes may perform well in the coming year, after the recent under-performance. Ferrous metals have seen exposures increase over three times to 4.2 per cent. Telecom services, which was the top sector in May, has seen slightly reduced exposure but is still among the top holdings of the fund.

Software, a key sector six months ago, has seen exposure being reduced by over a third in recent times. Similar is the case with media, where select stocks have seen a sharp appreciation in recent times. Interestingly, capital goods, the flavour of the market in recent months, have seen exposures reduced substantially to 5.2 per cent. Tightening interest rates appear to have seen a reduction in the automobile sector exposure.

Stock Moves: Most of the stocks selected by the fund comprise leading names of India Inc. ITC (3.3 per cent), which was not present in the fund in May, finds itself in the top ten holdings now. Colgate, another slow-moving FMCG stock, also figures in the portfolio. Tata Power, that has doubled in six months, has seen added exposures. Aban Offshore is also a fresh addition.

Welspun Gujarat, another stock that has doubled in price, and TV-18 are new stocks from the mid-cap segment. Axis Bank, ICICI Bank and Sesa Goa are some other important additions. Idea Cellular and Satyam Computer, which have delivered lukewarm performance, find themselves out.

Reliance Industries (6.4 per cent), every fund house's blue-eyed boy, has remained the top holding for the fund, though weights relative to the benchmark are low.