Fund of Fortnight

Reason for recommendation : The frontline equity market is currently trading at year high and is already up by around 2 per cent year-to-date. Nevertheless, the movement in the mid-cap and small-cap is much higher and their indices are up by 9 per cent and 10 per cent, respectively in last one month. One of the reasons for their surge is, after being beaten down in the last one year, they are now fairly valued. In addition to that expectation of a stable government at the centre, after the election, is allowing investors to take risky bets.  

HDFC Small Cap Fund - Direct Plan (Growth)

 

In this situation, an investor with a stomach for volatility and who can take risk, can invest in HDFC Small Cap fund. Though, we believe it bears a lower risk than its category. The fund has invested 66 per cent of its corpus in small-caps against the category average of 76 per cent. The fund has invested in mid-cap stocks more than its peers and hence is likely to be more stable. What is also good with the fund is that it is well-diversified and was holding 70 stocks at the end of January 31, 2019. Not a single company has more than 4 per cent weightage in the overall corpus of the fund. Therefore, it is immune to turbulence in any single company. Even the weightage of the top three sectors is limited up to 42.75 per cent. In terms of sector exposure, the fund is well-positioned to exploit the growth opportunities in the economy as 62 per cent of the corpus is exposed to cyclical sectors compared to 57 per cent of categories. Moreover, the presence of some chemical companies along with mid-cap IT companies in the fund's portfolio augurs well for the fund and its investors. 

 


This might not be top ranked fund, however, looking at risk-reward opportunity we recommend this fund.
 * Expected one year return is based on the assumption that current holdings remain constant.