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HDFC Small Cap Fund: Small Cap Winner
Sun, May 27, 2018
Source : Yash Jashnani, Citrus Interactive

HDFC Small Cap Fund is an open ended small cap equity diversified fund. The primary objective of the scheme is to provide long-term capital appreciation /income by investing predominantly in small cap companies. It is benchmarked against NIFTY 50 – TRI. The fund has an AUM of Rs 3,647 crore as on 30th April 2018 which has increased by Rs 2,573 crore as compared to last year 30th April 2017.

Performance

The fund has outperformed its benchmark in all time periods. It has also outperformed its category average in all time periods.

Scheme Name

YTD

6 Months

1 Year

3 Years

5 Years

Since Inception

HDFC Small Cap Fund

3.75

15.52

33.58

23.94

25.8

16.84

NIFTY 50 – TRI

2.37

4.36

17.01

10.89

14.03

16.13

Category Average

-1.5

3.28

13.96

13.31

20.03

NA

Rank

5/153

1/151

2/147

4/143

25/129

NA

Figures are in % as on 30th April 2018; Returns above 1 year in Compounded Annual Growth Rate (CAGR)

In terms of the calendar year returns the fund has outperformed its benchmark in all calendar years except in 2013. It has outperformed the equity diversified category in all time periods except in 2014.

Scheme Name

2013

2014

2015

2016

2017

HDFC Small Cap Fund

7.52

51.48

6.42

5.43

60.75

NIFTY 50 – TRI

8.07

32.9

-3.01

4.39

30.27

Category Average

4.83

55.24

3.61

4.78

38.11

Rank

36/129

62/131

40/139

60/145

5/145

Risk: In terms of measures of risk such as Standard Deviation and Beta (measured over the last 3 years), the fund has taken lower risk compared to category median.

 

Standard Deviation

Beta

HDFC Small Cap Fund

0.91

0.65

Category Median

0.95

0.84

Risk-Adjusted Return: In terms of Treynor and Sharpe ratio (measured over the last 3 years), the fund has provided higher risk-adjusted returns than the category median.

 

Treynor

Sharpe

HDFC Small Cap Fund

0.13

0.1

Category Median

0.04

0.05

Portfolio

Sector concentration: The fund’s concentration in the top 3, 5 and 10 sectors is lower than the category median.

 

Top 3

Top 5

Top 10

HDFC Small Cap Fund

17.38

26.53

46.02

Category Median

30.37

41.06

61.07

 

Company concentration: The fund’s concentration in the top 3, 5 and 10 companies is lower than the category median

 

Top 3

Top 5

Top 10

HDFC Small Cap Fund

9.4

15.14

27.57

Category Median

16.05

24.46

39.98

Number of Equity Holdings: 

The fund currently holds 67 stocks in its portfolio (30th April 2018), which is lower than the median stock count for the equity diversified category, which currently stands at 50. In the last 5 years the number of equity holding averages to 55.

Cash Equivalent:

Its cash equivalent for April 2018 was 6.62%. The average cash allocation for the last five years is 5.84%. Its maximum allocation to cash over the last two years is 19.09% in January 2018 and lowest was 0.98% in January 2016.

Portfolio Characteristics:

The top 5 sectors include Pharmaceuticals & Drugs, Engineering – Construction, IT - Software, Hotel, Resort & Restaurants and Trading.

In the last 6 months the Fund has bought Advanced Enzyme Technologies Ltd., Allahabad Bank, Amber Enterprises India Ltd., Atul Ltd., CG Power & Industrial Solutions Ltd., Chambal Fertilisers & Chemicals Ltd., eClerx Services Ltd., EIH Ltd., Firstsource Solutions Ltd., Goodyear India Ltd., Greenlam Industries Ltd., Kirloskar Ferrous Industries Ltd., Lemon Tree Hotels Ltd., Merck Ltd., Shaily Engineering Plastics Ltd., Sharda Cropchem Ltd., Taj GVK Hotels & Resorts Ltd. and Vijaya Bank and the stocks of Aarti Industries Ltd., Avanti Feeds Ltd., Balkrishna Industries Ltd., Century Plyboards (India) Ltd., City Union Bank Ltd., Dilip Buildcon Ltd., Hexaware Technologies Ltd., IFB Industries Ltd., KEC International Ltd., Sundram Fasteners Ltd., Tube Investments of India Ltd. and VIP Industries Ltd. have been dropped from its portfolio. Stocks of Larsen & Toubro Infotech            Ltd. have been bought and sold in its portfolio.

Process

The scheme would invest 65%-100% in equity and equity related instruments of small cap companies and 0%-35% would be invested in equity and equity instruments of companies other than small cap companies.

The scheme would invest 0-55% in Debt Securities including securitized debts.

The scheme would also invest 0-10% in units issued by REITs and InvITs and Non-Convertible Preference Shares.

The Scheme shall follow a predominantly small cap strategy with a minimum exposure of 65% to Small-Cap stocks. The Scheme may also seek participation in other equity and equity related securities to achieve optimal portfolio construction. The aim of equity strategy will be to predominantly build a portfolio of small-cap companies which have:

          Reasonable growth prospects

          Sound financial strength

          Sustainable business models

          Acceptable valuation that offer potential for capital appreciation

Fund Manager

Chirag Setalvad

Mr. Chirag Setalvad is a Senior Fund Manager of Equities at HDFC Asset Management Company Limited and previously served as Fund Manager from July 2000 to August 31, 2004. Mr. Setalvad re-joined the firm on March 19, 2007. Previously, from October 2004 to February 28, 2007, he was the Vice President at New Vernon Advisory Services Pvt. Ltd. Mr. Setalvad has an extensive experience in fund management, equity research, and investment banking. Mr. Setalvad also manages HDFC Mid-Cap Opportunities Fund (G), HDFC Balanced Fund (G), HDFC Long Term Advantage (G), HDFC Children’s Gift Fund and HDFC Balanced Fund (G).

He has received a Bachelor in Science degree in Business Administration from University of North Carolina, Chapel Hill.

Rakesh Vyas

Mr. Rakesh Vyas is a dedicated Fund Manager for Overseas Investment at HDFC Asset Management Company Ltd. He joined the firm in October 2009. He has an experience over 11 years of which 3 years in Application Engineering (Control & Automation) and 8 years in equity research. Mr. Vyas holds a PGDBM from XLRI Jamshedpur in 2006 and a BE degree in Electrical Engineering.

Our View

HDFC Small Cap Fund has shown very good consistency in performance. Being a small cap fund, it can be subject to relatively higher volatility. It can be considered by aggressive investors for their small cap allocation.

 

 
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