Skip to main content

Mutual Fund Review: HSBC Equity

HSBC Equity has fallen short of expectations when its peers are rewarding their investors with much higher returns

THE largest scheme from the HSBC basket, HSBC Equity Fund manages an average asset base of about Rs 1,377 crore. Launched in December 2002, the scheme is not only the oldest but also one of the most popular schemes from HSBC. Having run high on the popularity charts of the overall mutual fund (MF) industry during the few initial years of its launch, HSBC Equity has, however, failed to keep pace with the markets for quite some time now.

PERFORMANCE:

HSBC Equity started its innings in 2003 on a high not. In its first year, it beat its benchmark index the BSE 200 by extremely generous margins as it net asset value (NAV) jumped by 160% much higher than 95% rise in BSE 200 and a 72% return each by the Sensex and the Nifty that year. It maintained its winning streak in the following two years to emerge as one of the top performing funds of its time.

But having said that, the fund’s performance slipped in the most happening years of the bullrun. In 2006, it returned just about 37% against 40% returns each by the BSE 200 and the Nifty and 47% returns by the Sensex. In 2007, while it did manage to outsmart the Sensex and the Nifty, it marginally fell short of BSE 200’s over 60% returns by returning about 59% in that year. Though aligned to the indices, HSBC Equity returns fell short of the investor expectations since most popular diversified equity funds has rewarded their investors with much higher returns.

If one were to assume that it was probably the fund’s conservative investment strategy and large cap approach that restricted its returns in 2007, then the same strategy helped the fund during the financial crisis of 2008. The fund’s returns fell by about 48% and BSE 200’s fall by more than 56%. The Sensex and the Nifty gave a negative of about 52% each in that year.

But having impressed in the downturn, the fund once again failed to meet the expectations when the markets recovered last year. HSBC Equity’s 59% returns in 2009 were dwarfed by the spectacular performance by most major indices and diversified equity schemes in 2009, with its benchmark, BSE 200 in particular returning about 89% last year.

PORTFOLIO:

Being a large-cap fund, HSBC Equity has most of the BSE Group ‘A’ stocks in the portfolio incorporating an average of about 40 scrips at any given point in time. Most of these blue-chip stocks, however, date back to 2005-2006, which the fund has been holding since them. Ideally portraying the benefits of long-term holdings, stocks like Bhel, Bharti Airtel, HDFC Bank, HDFC, Infosys, L&T and Reliance Industries have more than doubled in valuation since they were acquired more than three years back.

It is also interesting to see the fund make some good picks during the meltdown at extremely reasonable valuations, including BPCL, Cipla, Hero Honda, Indian Oil, Jaiprakash Associates and State Bank of India among others. Some of the fund’s recent picks include Bombay Dyeing, Container Corp and Grasim Industries.

As far as the sectoral preferences are concerned, just like most other equity funds of the industry today, it is energy and finance that rule HSBC Equity portfolio. These two sectors together account for about 45% of the fund’s holdings. Of late, the fund has been gradually increasing its exposure in technology with Infosys alone commanding a 6% share in the portfolio.

OUR VIEW:

HSBC Equity is a largecap fund, which are considered to be the least riskiest of all diversified equity funds. The fund’s low risk quotient is also evident from its low beta of 0.81. Beta is a measure of volatility of the portfolio vis-à-vis the market. Thus a beta less than 1 indicates that the portfolio will be less volatile than the markets. This makes this fund an ideal investment for the risk-averse investors. It is, however, the fund’s performance, which though commendable in the downturn, has disappointed in rising markets. Given the fund’s current pace, investors can expect just about average returns from this fund.

Popular posts from this blog

National Savings Certificate

National Savings Certificate Here's everything you need to know about the 5-year savings scheme offered by the Government This is a 5-year small savings scheme of the government. From 1 July 2016, a National Savings Certificate (NSC) can be held in the electronic mode too. Physical pre-printed NSC certificates have been discontinued and replaced with Public Provident Fund-like passbooks. What's on offer The minimum amount you can invest in them is Rs100 and there is no upper limit. Under this scheme, all deposits up to Rs1.5 lakh qualify for deduction under section 80C of the Income-tax Act, 1961. The interest earned is taxable. You can invest in multiples of Rs 100. These certificates can be owned individually, jointly and also on behalf of minors. The interest rates for all small savings schemes are released on a quarterly basis. The effective rate for NSC from 1 October to 31 December is 8%. The interest is calculated on an annual compounding basis and is given along w...

Am you Required to E-file Tax Return?

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   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

Mutual Fund Review: HDFC Index Sensex Plus

  In terms of size, HDFC Index Sensex Plus may be one of the smallest offerings from the HDFC stable. But that has not dampened its show, which has beaten the Sensex by a mile in overall returns   HDFC Index Sensex Plus is a passively managed diversified equity scheme with Sensex as its benchmark index. The fund also invests a small proportion of its equity portfolio in non-Sensex scrips. The scheme cannot boast of an impressive size and is one of the smallest in the HDFC basket with assets under management (AUM) of less than 60 crore. PERFORMANCE: Being passively managed and portfolio aligned to that of the benchmark, the performance of the index fund is expected to follow that of the benchmark and in this respect, it has not disappointed investors. Since its launch in July 2002, the fund has outperformed Sensex in overall returns by good margins.    While every 1,000 invested in HDFC Index Sensex Plus in July 2002 is worth 6,130 now, a similar amount invested in Sensex then wo...

Different types of Mutual Funds

You may not be comfortable investing in the stock market. It might not seem like your cup of tea. But you can start by investing in Mutual Funds. Many first-time investors invest in Mutual Funds. This is because they do not know how to invest in individual securities. Basic information on Mutual Funds People invest their money in stocks, bonds, and other securities through Mutual Funds. Each Fund has different schemes with specific objectives. Professional Fund Managers look after these schemes. Your Fund Manager could help you invest in a scheme that suits your financial goal. Functioning of Mutual Funds You could make money through Mutual Funds in different ways. A single Mutual Fund could hold many different stocks, bonds, and debentures. This minimizes the risk by spreading out your investment. You could earn dividends from stocks and interest from bonds. You could also earn capital by selling securities when their price increases. Usually, you could choose to sell your share any t...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...
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