Mar 20, 2008

HSBC Advantage India Fund - Analysis

HSBC Advantage India Fund: Ferrous metals shine

HSBC Advantage India Fund is an open-ended, theme-based equity fund. Its objective is to invest primarily in themes that capitalise on economic reforms and development in India. Over the past six months the assets under management have moved up marginally, while the NAV has grown by 28 per cent. This implies that the fund has witnessed net outflows during this period.

The fund had 40 stocks in its December portfolio and the top ten stocks accounted for 41 per cent of the portfolio. HSBC Advantage India has pegged its stock specific exposures to less than 8 per cent of the assets over the past year.

The preferred three sectors have cornered 37 per cent of the assets. The fund appears to churn its portfolio actively, booking profits on opportunities.


Capital goods, which had cornered one-fourth of the assets a year ago, saw reduced exposure to 9.4 per cent. Holdings in stocks such as BHEL, Siemes and Thermax were trimmed substantially. The fund accumulated the construction stocks just before the rally. Jaiprakash Associates, Punj Lloyd and B.L.Kashyap turned out to be good picks and these stocks surged more than 100 per cent from the time of acquisition. The fund has gradually reduced holdings in these stocks at higher prices over the past two quarters.

The fund has also pruned exposure to telecom stocks Bharti Airtel and Reliance Communication. It preferred to reduce exposure in VSNL over the past quarter as the stock rose to a new high.

During last quarter the fund's holdings in the stock were pared by almost 50 per cent.

The fund has stepped up exposure to banking stocks over the past year. In the December portfolio, the sector accounted for a 13 per cent weight. Frontline stocks ICICI Bank and State Bank of India were accumulated.

The fund held Axis Bank, Allahabad Bank and Central Bank of India for a short duration. The key omission in the banking space was HDFC Bank; the stock fails to appear in the portfolio over the past one year.

One key sector that saw enhanced exposure was ferrous metals. The sector weight six months ago was hardly 1 per cent, but rose to 6 per cent in December.

PSL and Welspun Gujarat Stahl Rohren were new additions, while holdings in Jindal Steel and Power were pruned substantially.