Beating the benchmark

FUND PICK: HDFC Top 200

Background: HDFC Top 200 aims to deliver returns superior to those of the BSE 200 while maintaining a risk profile which is lower than that of an actively managed fund.

The fund maintains around 60 per cent of the portfolio in matched positions with the BSE 200 to record returns which are in line with those of the index.

This means that the per cent allocation of individual stocks in the index will represent the minimum that the scheme will commit in its portfolio. The scheme was launched in September 1996 and carries a 2 per cent entry load for investments upto Rs 50 lakh.

Performance: In its initial years HDFC Top 200 was an average performer. In 2001 and 2002 the fund stormed into the first quartile of its category. With year-to-date returns of 108.95 per cent, the fund will be making it to the top quartile of the category for the third year running.

The spectacular performance is also reflected in the fund's trailing three- and five-year returns which stand at 32.11 and 27.17 per cent respectively.

Portfolio: The fund benchmarks its portfolio against the BSE 200. This allows the fund the maneuverability of investing in large-cap stocks as well as mid-caps.

As its sector allocation closely matches that of the BSE 200, the fund was one of the earliest to take exposure to energy sector stocks such as ONGC in 2002.

The fund management maintained that even non-disinvestment stocks would be re-rated as a result of the improving valuations of stocks such as HPCL and BPCL.

Thus GAIL and SBI were also early entrants into the fund's portfolio and it has benefited from these stocks rising manifold since.

Top holdings
As on Nov 30, 2003	Value (Cr)	Net assets (%)
Oil & Natural Gas Corp	49.40	8.54
Grasim Industries	44.96	7.77
Reliance Industries	38.62	6.68
SBI	33.86	5.86
Infosys Technologies	23.13	4.00
Concor	20.34	3.52
ACC	18.12	3.13
Maruti Udyog	17.23	2.98
Bharat Electronics	15.81	2.73
ITC	15.43	2.67
Wipro	14.92	2.58
Bhel	14.45	2.50
Gujarat Ambuja Cements	14.02	2.42
SAIL	12.21	2.11
Century Textiles	12.19	2.11
Bank of Baroda	11.65	2.01
Sun Pharmaceutical	11.38	1.97
Corporation Bank	11.29	1.95
GAIL	11.01	1.90
Tisco	10.83	1.87

In the previous market surge of 1999-2000, the fund was not a top performer despite high exposure in FMCG, pharma and technology stocks.

At the same time avoiding momentum technology stocks prevented it from being badly hurt when markets crashed. As a matter of discipline, the exposure to the tech sector has come down gradually.

While healthcare and FMCG stocks dominated the portfolio till 2002, banking and energy stocks - the best performers in recent times - have been its top holdings so far this year.

Outlook: With exposure to both large-caps as well as mid-caps and a well-diversified portfolio, HDFC Top 200 is an ideal investment destination for long-term equity investors.