Skip to main content

HDFC Prudence

 

Balanced Funds, usually, fail to incite interest on the dalal street. The recent performance of HDFC Prudence, however, shows that you need not be reckless to rake in the moolah

 

IT IS a hybrid (balanced) fund. Yet, its returns, particularly in the recent past, have surpassed even those of the broader market indices – the Sensex and the Nifty. Launched in Jan '94, HDFC Prudence is one of the oldest equity-oriented hybrid funds of the country today. Its humungous asset size of over Rs 3,200 crore also makes it the largest and the most popular scheme in the category of balanced funds.

PERFORMANCE:

It is probably unfair to compare the performance of a hybrid fund with a core equity index. However, despite its blend of both debt and equity, HDFC Prudence has displayed a great ability to beat the equity market returns handsomely in its over a decade long performance history. Thus, despite being benchmarked to Crisil Balanced index, the fund's performance, so far, has inevitably raised its benchmark to an equity index like the Sensex or the Nifty. 

   HDFC Prudence has been successful in beating these indices uniformly year-onyear, since its launch, except in the most bullish years of 2006 & 2007. This indeed is surprising despite the fund's equity orientation towards mid- and small-cap stocks that had a ball in '06 & '07. The returns of about 33% and 43% in '06 and '07, respectively, may have disappointed any equity investor, for Sensex had returned about 47% in both the years and Nifty had given 40% and 55% returns, respectively. 

   But what really surprises is the fund's strong comeback in the current calendar year. Since January this year, the fund has delivered 82% returns, which is as good as the average of the category of diversified equity schemes. The Sensex and the Nifty have returned about 77% and 73%, respectively, during the period. 

   However, as far as the downturn of 2008 is concerned, despite outperforming the Sensex and the Nifty – given the balanced nature of the fund, it failed to beat the average returns of its balanced peers. The fund fell by about 42% in '08 against the average decline of about 41% by the category of balanced funds.

PORTFOLIO:

With about 75% of its assets invested in equity, the fund is extremely well-diversified and on average holds 55-60 stocks in the portfolio. And within the equity portfolio, the fund has a clear bias towards mid- and small-cap stocks that account for more than half of its equity portfolio. While the fund has been holding many of its stocks for over a couple of years now, churning the portfolio occasionally, some of its recent acquisitions have turned out to be multi-baggers. 

   Its recent picks like Lupin, Punj Lloyd, Simplex Infrastructure, CRISIL, Maharashtra Seamless and Biocon, during March – May '09 have more than doubled till date. As far as its long-term investments are concerned, it is benefiting mainly from the returns on some of the large-cap blue-chip companies it had picked early. These include stocks like SBI, Bank of Baroda, TCS, P&G, Glaxo Smithkline Consumer, Crompton Greaves and Sun Pharma among others. Initial investments in each of these stocks date back to early 2007 and even beyond. 

   At the same time, some of its long term mid- and small-cap acquisitions like ISMT, Indo Rama Synthetics, Uniphos Enterprises, Himatsingka Seide and Ahmednagar Forgings, among others, have fallen off grace since the time they were accumulated about two-and-half-years ago. 

   In terms of sectoral composition, financial services and pharmaceuticals have been dominating the fund's portfolio since 2008. In fact pharmaceutical sector, especially in the mid-cap space, has attracted attention of many fund mangers in the last few months. As far as the fund's debt compositions are concerned, the fund mostly invests in high rate papers especially those with AA+ or AAA ratings and in sovereign papers.

OUR VIEW:

HDFC Prudence's high midcap exposure definitely raises its risk quotient. However, the equity risk is well compensated by the exposure to high quality debt instruments. While the fund's performance in the current calendar year is breath-taking, it had a rickety performance a couple of years ago. Those seeking an investment opportunity in equities with 3-5 years' horizon can consider this fund.

 


Popular posts from this blog

Debt Mutual Fund Dividends are Taxable

DDT is deducted when a non-equity fund declares dividends. Equity and balanced fund dividends are tax-free The AMC is correct to deduct the dividend distribution tax (DDT) as it is mandated by tax laws. DDT in mutual funds is deducted every time a non-equity fund declares dividends. Equity fund and balanced fund dividends are tax-free . It is possible that you have invested in a non-equity fund for the first time or have received the dividend under a non-equity fund for the first time. That is why this is the first occasion when you have come across DDT.   The rate at which non-equity schemes deduct DDT has also gone up after the July 2014 budget. This is due to a change in calculation methodology. Earlier, if the fund has to declare a dividend of R 100, it used to make a provision for R 128.3, paying R 28.3 to the taxman and distributing the balance to the investor. This allowed the investor to bear less tax since the effective tax rate was 22.07 per ce...

Franklin India High Growth Companies Fund

Franklin India High Growth Companies Fund Online One of the key developments that the Street is keenly waiting for is a cut in interest rates by Reserve Bank of India . With demand rising gradually, a rate cut is expected to boost earnings growth for companies. In such a situation, schemes which invest in high growth companies are best suited, especially when seen from a long-term perspective. One such scheme is Franklin India High Growth Companies Fund. Fund managers Anand Radhakrishnan, Roshi Jain and Srikesh Nair strictly follow valuation parameters when it comes to choosing stocks.Valuation parameters, such as enterprise value, price-to-earnings growth ratio, forward price-to-sales ratio and discounted earnings per share, play a critical role in selecting companies for investments. Taking into account these parameters, the fund managers invest in companies which are poised for high growth in their respective sectors. This approach has been in favour of the scheme and it has perform...

Atal Pension Yojana contribution Tax Benefit for spouse

Contributions to Atal Pension Yojana (APY) are eligible for the same tax benefits as the NPS. This means that the contributions can be claimed under Section 80CCD (1B). The current limit for Section 80CCD (1B) is   Rs   50,000, over and above the   Rs   1.5 lakh limit under Section 80C. Section 80 CCD (1) is a different one, meant to cover employers' contribution towards NPS . You cannot get tax benefit by investing in the name of your spouse under Section 80 CCD . ------------------------------ ----------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in India for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Religare Tax Plan 4. DSP BlackRock Tax Saver Fund 5. Franklin India TaxShield 6. ICICI Prudential Long Term Equity Fund 7. IDFC Tax Advantage (ELSS) Fund 8. Birla Sun Life Tax Relief 96 9. ...

Avoid NFOs

  Don't get taken in by the flurry of new fund offers. You will be better off sticking to the tried and tested schemes.   For the past one year, to cash in on the bull run in equities, mutual fund houses have gone on a new fund offer (NFO) overdrive. But experts are unanimous in their advice: avoid NFOs . While past performance is not an indicator of how a fund will fare in the future, it does tell the investor how skilful the fund manager is. This crucial information is missing in an NFO. Not only is there no track record to judge an NFO by, many NFOs are similar to funds that already exist. If the new fund is similar to existing funds, you are better off investing in the latter. Around 67% of the new launches in 2014 were closed-end products. Investing in the NFO of a closed-end fund is doubly risky. In case the fund's performance is lacklustre, a closed-end fund does not allow you to exit. Even though closed-end funds are listed on the stock...

Mutual Fund Exit Load Changes

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Mutual Fund Exit Load Changes AMCs don't communicate about any change in exit load directly with investors, but do update on their website   The exit load applicable to your investments is the load which existed at the time when you invested in the particular fund. Any subsequent changes in the exit load will not be applicable to your investments.   However, Asset Management Companies ( AMCs ) periodically publish addendums in the newspapers, which state any change in exit loads of specific schemes managed by them. Such changes are also posted on their websites. However, a direct communication to an investor is not made, considering the costs involved in doing so. In their own interests, investors should not only track the performance of the funds they i...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now