HDFC Growth Fund

HDFC Growth Fund: Overview

It is an open-ended growth scheme which is suitable for investors who are looking for capital appreciation over a long term and are willing to invest predominantly in equity and equity-related instruments. It has a moderately high-risk profile and going by the name, the fund seeks to invest in sectors or companies that would benefit from a growing Indian economy. It will predominantly invest in large cap funds (50% -70%) and the remaining corpus in mid cap and small cap funds.

About Equity Funds

Equity funds are stock funds that are managed actively or passively. They can be categorized into various types according to market capitalization, target business sectors, and investment style. The number of equity funds available in the market is the maximum, making it a popular choice among people. Equity funds particular to various market sectors, specific interest groups or specific stock exchange are available. There is a type each to match different investment objectives of investors and various risk profiles as well.
The most common categorization of equity funds is based on market capitalization. There are large cap, mid cap and small cap stocks in which HDFC growth fund invests. These stocks can be better explained as follows:
  • Large Cap Stocks: Stocks whose market capitalization is greater than 25th largest stock by market cap in the CNX Midcap Index.
  • Mid-Cap Stocks: Stocks whose market capitalization is more than Rs. 500 crores but less than 25th largest stock by market cap in the CNX Midcap Index.
  • Small Cap Stocks: Stocks having a market capitalization of up to Rs. 500 crores.
 
Name of AMC: HDFC Asset Management Company Limited

Investment Objective:  The Fund seeks to invest predominantly in equity and equity-related instruments in order to generate long-term capital appreciation in future.

Asset Size: As on 31st March 2017, the fund had an asset size of Rs. 990.26 crores.

Ranking: CRISIL has ranked the fund second in the large cap category for the quarter that ended on 31st December 2017 and the rank has remained unchanged since then.

Fund Manager:  Mr. Srinivas Rao Ravuri

 

About Fund Manager

He is the senior fund manager of equities at HDFC Asset Management Company Limited and has over 18 years of experience primarily in equity research and fund management in the Indian financial market. He has an MBA and B.com degree in finance and has previously worked with Motilal Oswal Securities Ltd., Edelweiss Capital Ltd., and Securities Capital Investments (I) Ltd. At Edelweiss Capital Ltd. he has served as the Assistant Vice President of Equity Research.

Benchmark

S&P BSE 200 Sensex


About Benchmark:  S&P BSE 200 Sensex quantifies price movements and reflects the sensitivity of the market in an effective manner; it is one of the most followed indices which include set of 200 largest companies on the Bombay Stock Exchange according to market capitalization. Mutual Funds having S&P BSE 200 as their benchmark usually have a mix of large caps as well as mid caps. These funds attempt to generate better returns by assuming a little higher risk of mid-size companies.
 

Investment Approach

There are two types of investment styles that can be followed for the process of stock selection.
  1. Bottom-up approach: An investment style where investment decisions are made by examining individual companies first, followed by forecasting industry prospects and general economic conditions.
  2. Top-down approach:  An investment style where the selection of investment options starts with forecasting general economic conditions. Post this forecast, industry sectors which are expected to outperform are shortlisted and then the companies which are expected to outperform companies within the industry are selected for investment purpose.
HDFC Growth Fund follows a bottom down approach for its stock selection procedure i.e. investment decisions are made by examination of individual companies first followed by industry forecast.
 

Suitable for:

  • Investors who are looking for exposure to a well-diversified portfolio
  • Investors who are ready to invest in a portfolio that is focused on high conviction ideas with high exposure
  • Investors who wish to invest in a fund that lays emphasis on performance over medium to long term.

Investment Strategy

Investment Strategy:
1)    HDFC Growth Fund prefers to invest in:
•    Growth companies having reasonable valuations
•    Sustainable Businesses
•    Companies offering reasonable value

2)    The fund avoids:
•    Investing in companies with rich valuations with the assumption of high growth and high earnings
•    Significant exposure to cyclical companies or commodities
•    Considering cash calls in the portfolio
3)    The fund intends to invest in sectors or companies that will benefit from a growing Indian economy. The growth is usually driven by factors such as:
•    Ever increasing consumption levels
•    Increasing investments for establishing manufacturing capacities and building infrastructures 
•    Increasing investments in knowledge-based industries such as Information Technology and Pharmaceutical. This can be considered on the back of the growing technical workforce of the country
4)     The fund follows a bottom-up approach for selection while focusing on companies with sustainable  earnings power and the undervalued ones
5)    The fund provides exposure to a diversified portfolio and is therefore characterized by no market cap bias.
6)    The fund lays strong emphasis on the price of purchase and therefore mitigates portfolio risk by avoiding ‘growth at any cost’.
7)    This scheme aims to create long-term capital appreciation by investing in equity and equity-related securities. If the total assets under management go beyond Rs. 1000 crores, then the fund manager has the liberty to increase the number of companies to more than the specified number. 
8)    The scheme tries to seize the best available market opportunities without any sector bias
9)    The scheme follows  disciplined yet flexible bottom-up approach to determine bargain stocks 
10)    Visits and research is conducted to determine the intrinsic value of the company before pooling funds
11)    The scheme majorly focuses on large and established companies whose stocks would come with the promising potential of long-term growth.
12)    The scheme may also invest in other mutual funds or other schemes from the same Asset Management Company provided that it follows the prevailing regulations and is in conformation with the investment objectives of the scheme. According to the regulations, no investment management fees can be charged for such investments.
13)    The scheme may also invest in ADRs, GDRs, preference shares and warrants and into debt securities that can be converted into common shares.
14)    Prior approval from the trustee or the board of AMC is required before entering into any underwriting agreement or obligation.

NAV Disclosure:  At the end of every business day, the sale and repurchase price along with the NAVs will be disclosed and published in at least 2 daily newspapers.

Transaction Charges

o    According to the latest amendment of August 22, 2011, HDFC Asset Management Company has the liberty to deduct transaction charges on purchase or subscription made by an investor through a valid ARN holder. The applicable charges are:

    If you are investing in Mutual Funds for the first time, then you are liable to pay Rs. 150 as transaction charge for any purchase or subscription made over Rs. 10,000. The same will be deducted from the purchase amount so that the distributor of the investor can be paid the required amount and the rest is considered for investment purpose

    If you have already invested in mutual funds then you are liable to pay Rs. 100 as transaction charge for any purchase or subscription made over Rs. 10,000. The same will be deducted from the purchase amount so that the distributor of the investor can be paid the required amount and the rest is considered for investment purpose.  

    If the investments are made through SIP, and the total amount promised for investment is over Rs. 10,000, then the applicable transaction charges remain the same and will be deducted in 3 to 4 installments. 

    In order to identify, that whether the investor is investing for the first time or not, the PAN/PEKRN (Permanent Account Number/ PAN Exempt KYC Reference Number) is taken into consideration. It is therefore advisable to make sure that your PAN or KYC details are updated with the fund so that you don’t incur any extra charges. 

o    No transaction charges will be charged in the following cases:

    If the distributor of the investor hasn’t chosen to receive transaction charges

    If the purchase or subscription amount is less than Rs. 10,000. This holds true for investments made through SIP, where the total commitment value is less than Rs. 10,000.

    If the transactions are related to new inflows and are made through Dividend Transfers or reinvestments, Systematic Transfers or Switches, no transaction charges are applicable. It is applicable only for transactions related to purchase or subscription.

    If the purchase or subscription is not made through a distributor and is made directly to the fund, you are not liable to pay any transaction charges.

    No transaction charges shall be deducted if the subscription or purchase is routed through Stock Exchange(s). 

 
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