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BW Businessworld

Taking On The Challenge

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Patience is a virtue and, as Prashant Jain, chief investment officer and executive director at HDFC Mutual Fund, says, investors need to hold on to it given the current market dynamics.

Jain should know. He heads two of the biggest funds in India: HDFC Top 200 and HDFC Equity Fund. The latter has emerged
a winner in the Equity: Multi-cap category of the Businessworld-Value Research mutual funds study. With close to Rs 10,000 crore in assets, HDFC Equity Fund comes second only to Top 200. Jain, who has been in investment management for 20 years, came to HDFC Mutual Fund in 2003.

HDFC Equity's 3-year returns stand at 33.96 per cent and it has a portfolio churn ratio of 27.32 per cent (as on 29 February, 2012).

On his investment strategy, Jain says, "We are medium to long-term investors and our investments are driven by research with a medium to long-term view. Exposure to sectors like pharma and consumer non-durables, which the fund was heavy on in 2009-10 was trimmed in 2011, while exposure to banks was further increased, getting the highest weightage in 2011".
From the time the fund was floated, in 1995, it has given returns of over 22 per cent, while the benchmark index, the S&P CNX 500, has managed about 10 per cent.

The 44-year-old IIM Bangalore alumunus, who also happens to be a mechanical engineer from IIT Kanpur, says this has been possible because the fund follows a focused approach to investments and backs ideas that carry conviction. The fund controls risk by investing in quality companies and through diversification across key economic variables, he says.

Consider this: for every Rs 10,000 that you would have invested in Jain's Equity Fund at the time of its inception in 1995, you would have got Rs 2,61,673 (over 20 per cent) while the same investment in the S&P CNX 500 would have returned Rs 43,349 (about 9 per cent).

Is it not tough to maintain such numbers when the going gets tough? Jain says the toughest decisions, in the past, have been taken in challenging environments, when there were no easy options left. Investors, he believes, should persist with equity investments as they ultimately reward them for the holding period, though the timing of returns is uncertain. And, the longer the markets remain down, the longer is the time available to savers to accumulate more equity investments.

A quick analysis of Jain's fund reveals that not much has changed in the previous year with State Bank of India, ICICI Bank, Bank of Baroda, TCS, Infosys, Tata Motors switching positions but remaining its top holdings. However, the fund has seen its assets grow from Rs 2,500 crore at the beginning of 2009 to a whopping Rs 9,000 crore at the end of FY12.


(This story was published in Businessworld Issue Dated 30-04-2012)