Review of HSBC Equity fund

 HSBC Equity was the first fund launched by the fund house in ’02. It follows a large-cap strategy. Over 85% of the fund’s portfolio consists of large-cap stocks. The fund has maintained a low-risk portfolio, while giving above-average returns in the diversified equity category. It got a Gold rating as per the latest ET Quarterly MF Tracker, based on risk-adjusted returns.

Since its launch, the fund has given a return of 62.1% per annum. ’05 was not a good year for the fund, with some of its stock calls backfiring. There are also concerns regarding stability of the management team, as fund managers keep changing.

To deal with this issue, the fund has brought in twin managers to ensure that even if one quits, the other keeps the boat afloat. Since June ’06, Mihir Vora and Jitendra Sriram have been managing the fund. If the three-month returns are any indication, the new managers seem to have brought stability to the fund.

Performance:

The fund’s three-month returns have beaten both the Sensex and its benchmark BSE 200, with returns of 18.9%. The fund’s higher exposure to IT services, telecom and automobile sectors have worked well, and so have low exposure to consumer durables and metal stocks. In the one-year period, the scheme gave a return of 48%. Though the fund’s returns are better than its benchmark and category average, it underperformed the Sensex by a margin of 10 percentage points.

’05 was bad for the fund as its exposures in oil and gas, commodities and banking stocks backfired. During mid-’05, the fund was underweight on capital goods and FMCG, which led the market rally. This affected the fund’s returns. But the three-year returns look better — the fund outperformed the Sensex by a large margin, and also bettered its category average over the three-year period.

Fund Management:

Since the beginning of this year, there has been a lot of churning in the fund management, as Anup Maheswari quit to join DSP Merrill Lynch. Viresh Mehta, who took over from him, quit in June ’06. Since then, Mihir Vora and Jitendra Sriram have taken over the fund. The new managers have made significant changes like exiting HCL Technologies in June ’06. Exposure to Bharti Airtel and RCL was increased. 

Portfolio:

The fund’s portfolio is tech-heavy. IT and telecom stocks together account for 27% of net assets. While IT stocks led by Infosys account for 19% of allocation, telecom services account for 7.7%. In the past four months, the fund has increased its exposure to Infosys from 6.3% at the end of June to 8.6% in October ’06.

The other addition to its portfolio is banking stocks. From just under 5% in June ’06, the fund’s banking exposure has increased to 10.9%. The fund prefers PSU banks; PNB leads the pack with 3.7% allocation. The fund has exited ICICI Bank and bought BoI India and SBI. The fund prefers four-wheeler companies. It has 11% allocation in M&M, Maruti and Tata Motors.

Get more information