Investors, who aim to generate long term capital growth by investing in the comparatively secure large cap companies, can take a look at the HSBC Equity Fund. HSBC Equity has stood firm to its objectives by investing in stocks that hold the potential to outperform the index in the long run and simultaneously invests a small sum in debt instruments. The fund embracing all the above stated traits has skillfully managed to dole out handsome returns to its investors.

Launched in December 2002, HSBC Equity with an investment objective of generating long-term capital growth from an actively managed portfolio of equity and equity related securities is a diversified equity fund that follows a top-down approach to stock picking by taking sector specific calls. Within the sector, the fund prudently selects stocks with staunch fundamentals and stature to reap good returns in the long run. The fund also has the option of investing a part of the corpus in bank deposits and other money market instruments.

As the fund manager, Mihir Vora puts it, ``HSBC Equity Fund is positioned as a large-cap diversified equity fund. Hence at any point in time, only a small portion of the portfolio is invested in mid and small-cap stocks. The idea is to generate long-term returns with a medium risk-reward proposition.`` The fund has a risk control system to ensure ``true-to-label`` portfolio management, in line with the stated objective and positioning of the fund.

HSBC Equity has delivered excellent performance in terms of returns over the long-term horizon, way ahead of its benchmark BSE 200 Index. The fund generated returns of 53.29% since its inception as against 37.58% provided by its benchmark. It registered a growth of 31.57% and 39.29% over the last 2 and 3 years respectively, as against its benchmark, which delivered returns of 31.07% and 37.55% respectively.

The recent US subprime lending crisis followed by credit crunch situation impacted markets all over world badly, with Sensex falling almost 1,500 points during the same period. Political uncertainties in the country over nuclear-deal also added fuel to the fire. Mutual funds are no exception to this. Returns of most of the funds came down. Now the market is picking up from recent losses after reduced concern over US subprime lending crisis and improving credit crunch situation. But risk of political uncertainties still exists. HSBC Equity managed to post 25.66% returns compared with 24.86% delivered by benchmark over last one year. However, the long-term economic outlook of India is continues to remain positive, which is likely to be replicated in the stock markets.

The fund having dawned with an initial corpus of just Rs 35.7 crore has now grown to Rs 1,004.27 crore. Among fund’s favorite sectors are telecom, banks, construction, petroleum products and capital goods sector topping the list. On analyzing the July 2007portfolio, one discerns the fact that the fund invested about 9.94% of its assets in the telecom sector. When queried about this, the fund manager elucidates,``We have been bullish on the telecom sector for a long time. We see the sector as one of the secular growth sectors aided by increasing purchasing power, falling tariffs and changing demographics.``

Moving forward, the fact that comes to light is that the fund gradually reduced its exposure to the software sector when compared with the previous months. Vora deliberates the funds stand, stating that the fund is waiting for the markets to fully discount the impact of the appreciating Rupee. However he is fundamentally bullish on the growth prospects of the software sector and perceives this as a temporary negative.

The portfolio of the fund is fairly diversified at present with Reliance Industries, L&T, BHEL, Bharti Airtel, and ONGC finding a place amongst the top five holdings of the portfolio. These top five stocks in the portfolio account for about 25%.

The fund added two pharma stocks in the month of May; the fund manager is of the opinion that this is another growth sector, which has been a laggard over the last year. ``In the pharma sector, the company-specific factors are more important than sector-wide fundamentals as each company follows different business models – to that extent we analyze pharmaceutical companies with more of a bottom-up approach``, substantiates Vora.

On the whole, HSBC Equity is an attractive large cap oriented fund, encompassing lower risk characteristics. It makes lucrative for investors who have an appetite for consistent returns over long run with moderate risk.