HSBC Equity is a large-cap-oriented fund, launched nearly 10 years ago. The fund has outperformed its benchmark index, BSE 200, over the five-year period.

It has performed almost in line with its benchmark over three- and one-year periods. Even in the past six months, the fund has performed in line with the benchmark. When compared with its peer group, a few other equity growth funds such as Principal Growth, SBI BlueChip and Reliance Top 200 have delivered better returns over the past six months.

The fund’s assets under management over the past year fell more than its NAV , indicating redemption pressures, as there has been no dividend payout. However, in-line performance with the benchmark suggests scope for improvement in the fund’s performance.

We take a look at what the fund’s sector and stock choices were for the past one year.

Sector Trends

With a holding between 16 per cent and 22 per cent, banking appear to be the most preferred sector for the fund. It increased its stakes in the software sector to as high as 16 per cent in December and trimmed its holdings to 9 per cent. This may be due to the slowdown in the US and Europe affecting the prospects of IT companies.

The fund upped its allocation in consumer non-durables from 8 per cent a year ago to 11 per cent. Interestingly, over the year, the fund has increased its share in automobiles from 1 per cent to almost 6 per cent.

It has been maintaining its exposure in telecommunication services in the past one year as valuations become attractive in select stocks.

The industrial capital goods sector witnessed reduction in exposure from 5 per cent a year ago to 2 per cent.

On the whole, high exposure to many underperforming segments dragged down returns.

Stock Moves

The fund held anywhere between 29 and 33 stocks in the last one year while churning the portfolio. It had marginal exposure to derivatives and fixed deposits over the year but currently it doesn’t have any exposure.

The stock of HDFC Bank found a place in the top two holdings over the past one year. The fund reduced its holding in ICICI Bank from 7 per cent to as low as 4 per cent and later upped it to 6 per cent, as the stock started performing well and offered value. In the last six months, HDFC Bank has gained 20 per cent and ICICI Bank has climbed 4.5 per cent.

The fund raised the proportion invested in the stock of ITC from 5 per cent to 7 per cent over the past one year. The FMCG company continues to outperform the broader market.

On the other hand, the fund reduced its holdings in TCS and Infosys from 8 per cent and 7 per cent, respectively, six months ago to 4 per cent and 5 per cent in June. The index heavyweight stock, Reliance Industries, and L&T also saw reduction in holdings over the year. Moreover, the BHEL stock was also trimmed from 5 per cent to 2 per cent in the last 12 months and it moved out of the top ten holdings of the fund. Both Infosys and BHEL have plunged more than 20 per cent in the past six months.

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