Search the Internet          Tips  Sites: Finance, Investment

HDFC Income Fund

Dhirendra Kumar

HDFC Income Fund is the flagship fund from HDFC Mutual Fund. Launched in August 2000, the fund declared its maiden dividend of 6% under the half-yearly dividend option in March this year. With minimum investment of Rs 3000, investors can enter the fund at NAV. However, exit before 3 months attracts a load of 0.25%.

HDFC Income took off with an objective to optimise returns while maintaining a balance of safety, yield and liquidity. The fund was lucky to be bestowed with an envious size in depressed market condition. It initially treaded on a cautious path with a two pronged strategy to guard its assets. For one, it stayed invested in money market instruments, which offered attractive returns with interest rates ruling high. However, when rates rule high, longer-term debt instruments lose value. Here again, the fund guarded its asset base by investing at the shorter end of the maturity curve. With the sentiment turning positive in the last quarter of 2000, the fund stretched its maturity to capture the gains at the longer end and currently holds its maturity at 3.44 years.

FUND BASICS   Objective    Size (Cr)    NAV: 18/04/2001    Exit Price    Entry Price    Total Return   Income   815.85   10.91   10.91   10.91   9.10%

    In line with its stated objective of holding a liquid portfolio, the fund has parked a predominant part of its assets AAA equivalent instruments. These instruments offer higher protection against credit risk along with liquidity. Their exposure in the last trailing quarter averaged at 86% of the corpus and is split between corporate instruments and Government Securities. However, the fund has also sought to pep up returns with its AA and unrated instruments – which offer higher coupon for their relatively high risk. They accounted for 14.75% of the corpus for the same period.

BENCHMARK COMPARISONS (%)      1M    3M    6M    1Yr    3Yr   Fund   0.41   3.11   6.86   -   -   I-Bex Tot.   0.26   4.62   10.88   11.32   13.70   Obj. Avg.   0.60   3.44   7.54   10.55   12.10

    HDFC Income fund has grown rapidly – nearly doubled its size to Rs 816 crore in less than a year, albeit with a large institutional base. This, however, has not distracted the fund’s focus on quality - yet. With a return since launch at 9.1%, the fund has performed in line with the category. While its too early to comment on the performance, the fund seems to have got its moorings right.

Top Holdings (31/03/2001)      Value (Cr.)    % of Assets   Reliance Ind.   45.11   5.53   I C I C I   42.34   5.19   State Bank Of India   41.34   5.07   IDBI   33.62   4.12   GOI 2011   33.15   4.06   GOI 2009   32.73   4.01   GOI 2007   27.49   3.37   Power Finance Corp.   25.66   3.15   Lafarge India   25.16   3.08   GOI 2008   21.66   2.65   GOI 2006   21.23   2.60   Hindalco Ind.   20.41   2.50   Sundaram Finance   20.19   2.47   HUDCO   20.00   2.45   Gujarat Ambuja Cements   19.70   2.42

Source: Value Research

Money

Fund File

Tell us what you think of this report