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 would be worth around 4,890. Moreover, the fund has proved its mettle in bullish as well as bearish phases of the market.
During the stock market meltdown of 2008, which saw the Sensex plummet by over 52%, HDFC Index Sensex Plus' net asset value (NAV) declined about 47%. Similarly, its 81% gains in the recovery year of 2009 were almost at par with the Sensex. In 2010 - the year marked by extreme volatile conditions in the Indian equity market - the scheme returned a decent 19% absolute annual gains against 17% gains by the Sensex.
PORTFOLIO:
The scheme has a majority of its portfolio aligned to the Sensex. However, an interesting aspect of the portfolio is its composition outside the 30-share Sensex. These include scrips like Federal Bank, Proctor & Gamble Hygiene & Healthcare, Timken India, Container Corporation of India, India Glycols, Kirloskar Pneumatic and Jaiprakash Associates. Of these, barring Timken India and India Glycols, all other non-Sensex stocks are part of the portfolio for more than a year now. The fund has been invested in stocks like Kirloskar Pneumatic since 2006 while P&G Hygiene & Healthcare and Container Corporation have been in its portfolio since 2008. The benefits of long-term investments are clearly visible as each of these stocks has been aptly appreciated in value over the period.
The apprehension about the fund's portfolio is in the high percentage of cash - currently over 23% of its AUM - which is not invested in equities. High cash holding leads to an opportunity loss to investors as the same money if invested can yield much higher returns.
OUR VIEW:
HDFC Index Sensex Plus is a scheme clearly meant for investors who are content with returns which are at par with the Sensex. It is better placed than other index schemes in the category due to its mandate to invest some portion (10-20%) in non-Sensex stocks, which can yield higher returns on bullish tracks. However, for investors looking at aggressive gains, there are many other diversified equity schemes in the market to choose from.
