Equity Toppers

Have you seen the recent advertisement campaign where a major fund house is promoting fixed income schemes? Not that we want to point toward what the scheme is or how beneficial it could turn out to be for investors. What we are actually trying to point toward is the vulnerability of the equity markets which have put debt investments in a sharp focus. When the equity markets become dicey, fixed income schemes become the flavour of the season. If you thought that this piece of writing will tell you which fixed income schemes to invest in and which to avoid, let’s be very clear, that isn’t the case.

We take a look at the performance of the equity schemes of two major fund houses here. One is, HDFC Mutual Fund and the other is ICICI Prudential AMC. We have considered only diversified equity schemes and thave been in existence for more than five years. One most important reason why we did this is to get a fair idea of the performance of both the houses in good as well as bad times. The study is divided based on three factors. Firstly, dedicated sector funds, second, the dedicated large and mid-cap schemes and finally the overall performance of these schemes.[PAGE BREAK]

Sector Dedicated Fund Schemes

HDFC Mutual Fund

In the equity diversified space HDFC Mutual Fund has only one scheme which is the HDFC Infrastructure Fund. This fund has a corpus of Rs 476 crore and was launched in early 2008. This was a time when the scope of growth in the sector was looking to be phenomenal. But unfortunately the tables have turned over on the opposite direction. Political inertia and delay in environmental clearances for several infrastructure projects have played spoilsport for the sector. This is being reflected in the performance of the fund scheme too.

Since its inception the fund has not generated positive returns. Its returns over the past five years stood at -4.16 per cent, three years at -18.51 per cent and one year at -25.84 per cent respectively. The fund also has not been able to match its category performance over the same period and has been an underperformer here also. In its portfolio Financials are stuffed to the extent of 39.83 per cent of the total fund value followed by energy (27.42 per cent) and construction (9.66 per cent).[PAGE BREAK]

ICICI Prudential AMC

Contrary to the above ICICI Prudential has five sector-dedicated equity schemes namely, ICICI Prudential Banking and Financial Services, ICICI Prudential FMCG, ICICI Prudential Infrastructure, ICICI Prudential Services and ICICI Prudential Technology. The total corpus of these four funds stands at Rs 2174 crore. Let us look at the performance of these schemes one by one.

ICICI Prudential Banking and Financial Services Fund: The fund since its inception has not been able to generate positive returns over a one year period (-3.94 per cent) as well as over a three year period (-1.44 per cent). With a corpus of Rs 270 crore, it has however managed to generate positive return of 10.8 per cent over the five year period back from now.

ICICI Prudential FMCG: This is one of the oldest fund schemes in the markets. It was launched in the year 1999 and has been a performer in its domain. More than 85 per cent of the portfolio consists of FMCG stocks. The scheme has been able to generate returns of 21 per cent, 18.2 per cent and 8.79 per cent respectively for five year, three year one year respectively. This reflects on the good performance of FMCG stocks over this period. But it really takes some good stock picking and a sense of where the markets are cyclically headed to be where it matters at the opportune time.

ICICI Prudential Infrastructure: In line with the performance witnessed by its peer HDFC MF, this fund has not been able to generate returns for its investors. In the three time periods that we are considering the scheme has given a negative return of 3.18 per cent, 10.94 per cent and 11.07 per cent for five, three and one year time period respectively.

ICICI Prudential Services Industries and ICICI Prudential Technology: In the last one year these two schemes have generated returns of 37.53 per cent and 29.28 per cent respectively. The main reason behind this outperformance is the better performance of IT stocks on the bourses backed by the depreciating INR. The corpus of these schemes stands at Rs 140 crore and Rs 100 crore respectively for ICICI Prudential Services Industries and ICICI Prudential Technology.

Our Comments

It seems that with better sectoral distribution by ICICI Prudential has been able to emerge as a clear winner in the sector funds category. The median return of these funds stands at 8.79, 9.09 and 10.80 for one, three and five year periods respectively. At this juncture considering the present market conditions fund schemes like ICICI Prudential FMCG and ICICI Prudential Services Industries can be considered for investments.[PAGE BREAK]

In case of index funds the performance has been almost in line for both the fund houses. The Sharpe ratio for the index funds stood at -0.20 and -0.21 for HDFC and ICICI Prudential respectively. The corpus of HDFC MF stands at Rs 14665 crore in the six schemes that they have in their fold as compared to Rs 1117 crore for the four schemes of ICICI Prudential. Most of the schemes of both the fund houses have witnessed negative returns. ICICI Prudential Midcap has given out negative return of -9.49 per cent. This is one only one index fund that has remained in the red in terms of returns generates in one year and three year time horizon.

The best performance from a medium-term perspective is seen in ICICI Prudential Top 100 scheme which has generated 4.38 per cent returns in the last three years and not only this, in the last one year it has generated a positive return of 7.72 per cent. In terms of positive returns generated in all the three time frame that we are considering, ICICI Prudential scores well above HDFC MF as the result stand at three against two for the respective fund houses. The median return of these funds stands at 4, 0.29 and 5.90 for one, three and five year respectively for ICICI Prudential as against 0.72, 0.88 and 6.53 for HDFC MF in the same time horizon.[PAGE BREAK]

Our Take

We have presented to you two varied scenarios taking into consideration the index funds and sector funds. In both the cases ICICI Prudential scores over HDFC. Hence, when we talk about performance, ICICI Prudential certainly scores over HDFC Mutual Fund.