Mar 19, 2008

HDFC Growth Fund - Analysis

HDFC Growth Fund: Stability in holdings

HDFC Growth Fund invests in stocks across market capitalisations. Despite a large-cap bias, mid and small cap stocks account for 28 per cent of the portfolio. The fund has managed to consistently beat its benchmark Sensex over one-, three- and five-year periods.

In the latest portfolio, the fund has invested in as many as 52 stocks across 18 different sectors making it a fairly diversified portfolio. In the September 2007 to February 2008 period, the fund's corpus has increased by 48.2 per cent to Rs 924.5 crore, while the NAV per unit has increased only 16.6 per cent. This may indicate net inflows into the fund.

Sector Moves: There is a fair bit of stability in terms of top sector holdings in the portfolio. Industrial capital goods (14.4 per cent) and pharmaceuticals (13.9 per cent) sectors continue to be the top two sector holdings, although exposures have been a bit reduced.

Banks and consumer non-durables also figure among top holdings in the fund, and have seen increased exposures over the September-February period. While capital goods and banks have done well in the past year, they have been among the worst hit in the recent meltdown.

The respective sector indices were beaten down by over 25 per cent in the last couple of months. Construction and predictably, software exposures have been pared in the six-month period.

Interestingly, media and entertainment (4.6 per cent), which were not part of the portfolio six months ago is now in the top ten sector holdings for the fund. The power sector has been exited, while telecom services and auto ancillaries exposures have been increased substantially.

Stock Moves: Tata Communications and Exide Industries, stocks that have gained over 23 per cent in the Sept-Feb period find their way into the portfolio. Sadbhav Engineering, a stock that ran up 115 per cent during this period also finds its way in. Most other stocks are those whose prices have fallen during September-February. These include stocks such as Zee Entertainment, HT Media and Dr Reddy's Labs.

The fund has also taken profit booking opportunities, with several stocks whose prices rose between 60-105 per cent have been exited. These include, Axis Bank, Hanung Toys and Tata Power. Other high-profile exits include DLF, HPCL, Ranbaxy Labs, and Punj Lloyd.

Reliance Industries, SBI, ONGC and BHEL are the stocks retained by the fund during the period and are among the fund's top holdings.