When it comes to higher risks and flexibility, Fidelity India Growth fund scores better than its peer, Fidelity Equity. The fund's returns scorecard speaks for itself
THOSE who have tracked the Indian mutual fund for long have often recommend Fidelity Equity as a valuable investment option from the Fidelity stable. This flagship scheme of Fidelity Asset Management Company is quite popular with investors and is viewed as one of the top performing equity mutual fund schemes. Its popularity has, in fact, overshadowed the Fidelity India Growth fund which mirrors not only the portfolio but also the performances of these two schemes.
The only difference probably is in the investment mandate where Fidelity India Growth looks to take on higher risks as the fund is more tilted towards growth stocks. At the same time, it also has the flexibility to invest in international markets at the discretion of the fund manager.
PERFORMANCE:
Launched in September 2007, Fidelity India Growth Fund has had a slow start posting just about 9% returns in the first quarter of its launch against 18% gains reported by its benchmark index — the BSE 200 during the same period. But thereafter, this fund gathered steam. The scheme checked its downfall in 2008 with its net asset value (NAV) plummeting by about 50% against a decline of over 56% in the BSE 200. Then again in 2009, it returned gains of 91% against the BSE 200's 88% returns during that year. Last year too, despite extremely volatile conditions in the market, Fidelity India Growth managed to put up an impressive show, logging gains of 27% against the BSE 200's 16% returns for the year. However, with a fall of close to 10% in its NAV since the beginning of the current calendar year, the net gains to the investor since the launch of this fund would be about 18%. A similar investment in BSE 200 would have fetched about -2% returns during the same period.
PORTFOLIO:
Though similar to Fidelity Equity on the portfolio composition front, the assets managed by Fidelity India Growth are no match to the size commanded by Fidelity Equity today. Fidelity India Growth today manages just about 350 crore against the asset base of more than 3,000 crore managed by Fidelity Equity.
But size is a little concern if the fund is prompt in delivering better returns. The top five holdings of India Growth are just similar to those of Equity and include Reliance Industries, Infosys, TCS, ITC and HDFC Bank which account for nearly 28% of the fund's equity portfolio. In fact, it holds most of the large-cap blue-chip stocks, most of which have been invested in 2008 and 2009 at attractive valuations. And this is what has probably bolstered the fund's performance. As far as the fund's diversification strategy is concerned, its portfolio currently comprises nearly 50 stocks which adequately restrict its risk per stock. The portfolio commands a beta of about 0.89, which implies that for every 1% gain or fall in the returns of the broader market indices, the fund's NAV would gain or decline by about 0.9%, making it a relatively safer investment avenue.
OUR VIEW:
For a layman, Fidelity India Growth appears to be a mirror image of Fidelity Equity fund — in both performance as well as portfolio composition. Investors can thus consider either of the funds as an investment option. However, Fidelity India Growth has a bias for high growth stocks, can take concentrated bets at times, rendering it a little high on risk quotient vis-àvis Fidelity Equity.
