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HDFC Top 200: Fund Analysis
Fri, Jul 29, 2016
Source : Yash Jashnani, Citrus Interactive

HDFC Top 200 Fund is an open ended large cap equity diversified Fund. The primary investment objective of the scheme is to generate long term capital appreciation from a portfolio of equity and equity linked instruments. The investment portfolio for equity and equity linked instruments will be primarily drawn from the companies in the BSE 200 Index. The fund was launched in September 1996 and is benchmarked against S&P BSE 200. The Fund has an AUM of Rs 12,568 crore as on 30th June 2016 which has decreased by Rs 812 crore as compared to last year 30th June 2015.

 

Performance

 

The fund’s performance across various time horizons is very good as seen in the table given below. It has beaten its benchmark throughout the time horizon in all time periods shown below except for the last 1 year. It has done better than the equity diversified category in the last YTD, 6 months but not in the last 1-, 3- and 5-year periods. 

 

 

YTD

6 Months

1 Year

3 Years

5 Years

Since Inception

HDFC Top 200 Fund

5.38

4.7

-0.11

16.84

10

20.71

S&P BSE 200

4.77

4.36

0.07

14.5

8.85

15.42 12.39

Category Average

4.18

3.57

3.15

22.92

14.03

NA

Rank

53/163

54/163

120/159

114/146

115/138

NA

 

Figures are in % as on 30th June 2016; Returns above 1 year in Compounded Annual Growth Rate (CAGR)

 

In terms of the calendar year returns the fund has beaten the benchmark in 2011, 2012 and 2014 but has not in 2013 and 2015. However, it has underperformed the equity diversified category average in all the last 5 calendar years. 

 

 

2011

2012

2013

2014

2015

HDFC Top 200 Fund

-24.3

32.43

4.05

46.52

-6.09

S&P BSE 200

-26.95

30.98

4.38

35.47

-1.48

Category Average

-23.92

34.25

5.43

54.21

3.76

Rank

81/134 

73/140

97/144

85/147

152/156

All figures in %.

 

 

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

 

 

Standard Deviation

Beta

HDFC Top 200 Fund

1.17

1.1

Category Median

0.98

0.89

 

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

 

 

Treynor

Sharpe

HDFC Top 200 Fund

0.05

0.05

Category Median

0.07

0.06

 

 

Portfolio Category:

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

 

Top 3

Top 5

Top 10

HDFC Top 200 Fund

43.87

57.14

77.54

Category Median

36.36

49.44

70.09

 

 

Company concentration: The Fund’s Concentration in the Top 5 and Top 10 Companies is higher than the category median except the Top 3 Companies.

 

 

Top 3

Top 5

Top 10

HDFC Top 200 Fund

19.92

31.92

48.81

Category Median

18.77

27.25

43.96

 

 

Number of Equity Holdings: The Fund currently holds 60 stocks in its portfolio (30th June 2016), which is higher than the median stock count for the equity diversified category, which currently stands at 46. In the last 5 years the number of equity holding averages 66.

 

Cash Allocation:

 

Its cash equivalent for June 2016 was 0.35 per cent. The average cash allocation for the last five years is 0.93%. Its maximum allocation to cash over the last two years is 4.01% in February 2015 and lowest was -0.02% in March 2016.

Portfolio Characteristics

The top 5 Sectors include Bank-Private, IT-Software, Bank-Public, Refineries, and Engineering-Construction

 The fund’s exposure to cyclical stocks currently is 74% with Defensives at 6% and services at 17%. In the last 6 months the fund has bought Century Textiles & Industries Ltd., Adani Ports and Special Economic Zone Ltd., LIC Housing Finance Ltd., Hindustan Petroleum Corporation Ltd., Mahindra & Mahindra Financial Services Ltd. and GAIL (India) Ltd.

Stocks of Crompton Greaves, Divis Laboratories Ltd., Petronet LNG Ltd. Oriental Bank of Commerce, Ambuja Cements Ltd., Indiabulls Real Estate Ltd., Container Corporation of India Ltd. and Allahabad Bank have been dropped from its portfolio.

 

Process

The investment strategy of primarily restricting the equity portfolio to the BSE 200 Index scrips is intended to reduce risks while maintaining steady growth. Stock specific risk would be minimized by investing only in those companies that have been thoroughly researched by the investment manager's research team. Risk would also be reduced through a diversification of the portfolio.

 

The Scheme may also invest a maximum of 25% of its net assets of the Scheme in derivatives such as Futures & Options and such other derivative instruments as may be introduced from time to time for the purpose of hedging and portfolio balancing and other uses as may be permitted under the regulations and guidelines. The Scheme may also invest a part of its net assets, a minimum of 40% of its net assets, in foreign / overseas markets in Global Depository Receipts (GDRs), ADRs, overseas equity, bonds and mutual funds and such other instruments as may be allowed under the Regulations from time to time. The scheme will invest 100% of its net assets in equity and equity linked instruments.

The fund’s exit load, like other equity funds, is 1% if it is redeemed or switched within 1 year from allotment. The minimum amount of investment in the fund is Rs 5000.

Fund Managers

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 manages HDFC Annual Interval Fund, HDFC Arbitrage Fund HDFC Balanced Fund, HDFC Banking and PSU Debt Fund, HDFC Capital Builder Fund, HDFC Capital Protection Oriented Fund HDFC Cash Management Fund, HDFC Children’s Gift Fund, HDFC Core & Satellite Fund, HDFC Corporate Debt Opportunities Fund, HDFC Dual Advantage Fund HDFC Equity Fund, HDFC Equity Savings Fund, HDFC Floating Rate Income Fund, HDFC Growth Fund, HDFC High Interest Fund - Short Term Plan, HDFC High Interest Fund - Dynamic Plan, HDFC Income Fund, HDFC Infrastructure Fund, HDFC Large Cap Fund, HDFC Liquid Fund, HDFC Long Term Advantage Fund, HDFC Medium Term Opportunities Fund, HDFC MF Monthly Income Plan, HDFC Mid - Cap Opportunities Fund, HDFC Multiple Yield Fund - Plan 2005,HDFC Premier Multi-Cap Fund, HDFC Prudence Fund, HDFC Retirement Savings Fund, HDFC Short Term Opportunities Fund, HDFC Short Term Plan, HDFC Small & Mid Cap Fund, HDFC TaxSaver, HDFC Fixed Maturity Plans. Mr. Vyas holds a PGDBM from XLRI Jamshedpur in 2006 and a BE degree in Electrical Engineering.

 

Mr. Prashant Jain:

Mr.Prashant Jain is the Chief Investment Officer, Executive Director, and Fund Manager at HDFC Asset Management Company Ltd. From June 20, 2003 to June 30, 2004, Mr. Jain served as the firm's Head of Equities. He joined the firm in June 2003. He has an experience collectively over 25 years of experience in fund management and research in the mutual fund industry. Prior to this, Mr. Jain was the Chief Investment Officer, Head of Funds Management, and Fund Manager at Zurich Asset Management Company (India) Private Limited., from July 1993 till June 19, 2003. Before that, he worked at SBI Mutual Fund as Fund In-Charge from 1991 to 1993. Mr. Jain manages HDFC Equity Fund, HDFC Infrastructure Fund, HDFC Prudence Fund, and HDFC MF Monthly Income Plan – Long Term Plan- (Equity Assets). Mr.Jain is a chartered financial analyst from AIMR. Mr. Jain holds a PGDM from the Indian Institute of Management Bangalore and he has also received a B.Tech from the Indian Institute of Technology, Kanpur.

 

Our View

HDFC Top 200 has done a decent job in terms of beating its benchmark but has not managed to do well compared to the peer set. However, we find that the performance has picked up in the recent 6-month period – primarily owing to the concentration to banking sector in its portfolio. The fund has a good fund management team with a strong track record. It can be considered for the large cap allocation in your portfolio.

 

 

 
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