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HDFC Small Cap Fund - An open Ended Equity Scheme

Small is Powerful!

September 2017 Please refer page 21 for product labelling


Fund History

¦ Launched as Morgan Stanley A.C.E. Fund on April 3, 2008 as a multi-cap fund

¦ Scheme acquired by HDFC Mutual Fund in 2014* and fund repositioned as HDFC Small & Mid-cap Fund with a focus
on small and midcap stocks

¦ Scheme repositioned** in November 2016 and renamed as HDFC Small Cap Fund, with a focus on Small cap stocks

*Scheme acquisition as on close of business hours on June 27th 2014.


** W.e.f. November 9th 2016 3
HDFC Small Cap Fund - What Has Changed

¦ Small cap Exposure 50-75%

¦ Midcap Exposure 25 - 50%


Before
¦ Number of Companies - 65 Stocks

¦ Weighted Average Market Capitalization ~ 13,000 Crores

¦ Small cap Exposure 80-100%

¦ Midcap Exposure 0 - 20%


After
¦ Number of Companies - 50 to 60 Stocks

¦ Weighted Average Market Capitalization - 6,000 - 8,000 Crores

¦ Predominantly small cap oriented equity fund


Impact
¦ Improved focus on Small cap ideas and themes

For complete scheme related information refer page 16 onwards or the Scheme Information Document. 4
Why Small Caps?

¦ High Growth Potential to drive higher returns relative to large caps*

¦ But volatility risk is not higher^ - Volatility exhibited by small caps^^ is in line with that of large caps (See page 7)

¦ Large Universe - ideal for stock picking - Approx 1,200 traded stocks with high dispersion of returns (See page 8)

¦ Scope for P/E expansion to drive higher returns

Higher Growth Potential Large Universe

¦ Smaller base of operations

¦ Ability to gain market share Large caps -


Market Cap above Rs. 101,000 Cr
26 Companies
¦ Focus on niche segment
Mid caps
81 Companies
Market Cap above Rs. 20,000 Cr

Small caps
1,231 Companies
Others below Rs. 20,000 Cr

Source: BSE & NSE. Stocks that have been traded in each of the past 3 nancial years have been considered. Market Cap data as on June 30th 2017. De nition
of large caps – Market cap above the largest stock by market cap in the NIFTY Midcap 100 Free oat index, Midcaps – Market cap above the largest stock by
market cap in the NIFTY Smallcap 100 Free oat index. All other stocks are classi ed as small caps. Stock cut off – Market Cap above Rs 150 Cr
*carry a higher risk of market uctuations and are prone to higher liquidity risk. Small caps are strictly not comparable to Large caps stocks. ^ Historical
performance indications and nancial market scenarios are not reliable indicator for current or future performance.^^ Quality companies, strong balance
sheets and well managed companies
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Why Small Caps? “Big things often have small beginnnings”
- Unknown
Scope for P/E Expansion

¦ Size of the company increases


¦ Analysts start tracking stocks
¦ Institutional holding increases
¦ Better disclosure levels can lead to greater familiarity and high multiples
¦ As a result, smaller stocks which are often mis-priced get re-priced

Under Researched : Limited Analyst Coverage Under Owned : Lower Institutional Holding

Average Analyst Ownership Pattern amongst Index Constituents (%)


Index
Coverage
Promoter
Index Institutional Retail
Group
NIFTY 50 Index 41
NIFTY 50 Index 43 41 15
NIFTY Free Float Midcap 100 Index 20
NIFTY Free Float Midcap 100
NIFTY Free Float Small Cap 100 Index 6 54 29 17
Index
NIFTY Free Float Small Cap 100
54 22 24
Index

For small cap stocks, company speci c factors have a much higher impact than macro factors.

Source: Bloomberg, HDFC AMC Research, Company Reports


Average analyst coverage is the average number of analysts covering each of the index constituents as on June 30th 2017.
Ownership pattern as disclosed by index constituent companies to the NSE as on QE March 2017 6
Why Small Caps?
Is risk higher?

¦ A common perception is that small caps are riskier

¦ Volatility exhibited by the Small Cap benchmark is in line with large and midcaps (see charts below)

¦ Numbers say otherwise

Small caps fall similar to Large/Mid caps on bad days Small caps are equally volatile as Large/Mid caps

Number of Days the Index has fallen > 1%, 1.5% & 2% Annualized Volatility
30.0%
24.2% 23.5%
800 25.0% 22.9%
592 557 571
600
393 342 344 20.0%
400 261
210 215 15.0%
200
10.0%
0
Fall > 1% Fall > 1.5% Fall > 2% 5.0%

NIFTY Smallcap 100 Freefloat Index NIFTY Midcap 100 Freefloat Index NIFTY 50 NIFTY Smallcap 100 NIFTY Midcap 100 NIFTY 50
Freefloat Index Freefloat Index

Source: HDFC AMC Research, Bloomberg


Calculations done from 1st Jan 2004 (NIFTY Small cap 100 Index – Inception date) for all indices for the purpose of consistency of data. All calculations as of June 30th 2017.
Annualized volatility calculated based on day wise changes in index values of mentioned indices. Past performance may not be sustained in the future.
Historical performance indications and nancial market scenarios are not reliable indicator for current or future performance. Small Caps carry a higher risk of market
uctuations and are also prone to higher liquidity risks. Small caps are strictly not comparable to Large caps stocks 7
Why Small Caps?
A case for Active Investing

¦ Within small caps there are large number of companies that show high returns and ones with low returns

¦ Therefore, scope for active stock picking

¦ Focus on quality of business and management, consistency in earnings growth and reasonable valuations
can lead to alpha generation

CY 2016 CY 2015
Returns
Large Cap Mid Cap Small Cap Index Large Cap Mid Cap Small Cap Index

Greater than 50% 2 12 385 7 6 44 830 10

20 to 50% 1 21 195 19 6 16 125 14 High Return


Dispersion
0 to 20% 7 15 185 19 6 12 85 14

0 to -20% 9 23 177 18 5 5 80 26

-20 to -50% 4 11 210 35 - 6 84 29

NIFTY Small Cap Index Returns 2.3% 7.2%

Source: HDFC AMC Research, Bloomberg


De nition of large caps – Market cap above the largest stock by market cap in the NIFTY Midcap 100 Free oat index , Midcaps – Market cap above the largest stock by
market cap in the NIFTY Smallcap 100 Free oat index. All other stocks are small caps. Stocks selected have been traded in each of the past 2 nancial years. The above chart
is for illustrative purposes only. Small Caps carry a higher risk of market uctuations and are also prone to higher liquidity risks. Small caps are strictly not comparable to
Mid-caps/Large caps stocks 8
Small Caps Have Outperfomed Large Caps
Returns 1 Year 3 Year 5 Year 1st Jan 2004
900.00
NIFTY 50 14.88% 7.75% 12.52% 12.62%

NIFTY Small Cap 100 Free Float Index 25.76% 10.70% 16.89% 15.87%
800.00

700.00

600.00

500.00

400.00

300.00

200.00

100.00

0.00

Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17

NIFTY 50 NIFTY Smallcap 100 Free Float Index

Source: HDFC AMC Research, Bloomberg


All calculations as of June 30th 2017. The current investment strategy is subject to change depending on the market conditions. 1st January 2004 is the inception date of
the NIFTY Small Cap 100 Free Float Index. Historical performance indications and nancial market scenarios are not reliable indicator for current or future performance.
Small Caps carry a higher risk of market uctuations and are also prone to higher liquidity risks. Small caps are strictly not comparable to Large caps stocks.
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Indian Economy : Improving outlook
FY13 FY14 FY15 FY16 FY17 FY18E FY19E

GDP at market price (%YoY) 5.5 6.5 7.2 7.9 7.1 8.2 8.0

Centre’s fiscal deficit (% GDP) 4.9 4.5 4.1 3.9 3.5 3.2 3.2

Current Account Deficit (CAD) (% GDP) 4.7 1.7 1.3 1.1 0.8 1.2 1.6

Net FDI (% of GDP) 1.1 1.2 1.5 1.7 1.6 2* 2

Consumer Price Inflation (CPI) (Avg) 10.2 9.5 6.0 4.9 4.5 4.2 4.5

India 10 year Gsec Yield (at year end) 8.0 8.8 7.7 7.5 6.7 N.A. N.A.

Source: CEIC, CSO, RBI, Morgan Stanley Research; Economic Survey, E-Estimates, * HDFC AMC estimates

30% 30%
Exports
25% YoY % 25%
20% 20%
¦ Impact of higher infra spend to be felt in FY18 and beyond. 15% YoY %, 3MMA 15%
Roads, Railways, Power T&D etc. to lead 10% 10%
5% 5%
¦ Exports growth at six and half year high. March exports growth 0% 0%
-5% -5%
was at 27.6% yoy (FY17: 5% and FY16: (-)15.5%)
-10% -10%
-15% -15%
¦ Due to INR appreciation, good monsoon and stable commodity -20% -20%
prices, CPI is expected to remain moderate -25% -25%
-30% -30%
Nov-11

Nov-12
Mar-13
Jul-13
Nov-13
Mar-14
Jul-14
Nov-14
Mar-15
Jul-15
Nov-15
Mar-16
Jul-16
Nov-16
Mar-17
Mar-12
Jul-12
¦ Limited and temporary impact of demonetization

Source: Morgan Stanley Research

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Equity Markets - Market cap to GDP near lows
India market cap to GDP ratio, calendar year-ends 2005-18 (%)

Mcap/GDP (%) Sensex PE - 12 month forward

160 22.8 25
21.5
140 20.0 20.2
149 16.8 17.5 20
120 16.3 15.9 16.7
15.1
13.2 14.2
100 12.6
99 15
88 10.9 98
80
81
69 71 76 74
60 56 72 10
61 64 69

40
5
20

0
2005 2006 2007 2008 2009 2010 2011 2012 2014 2014 2015 2016 2017 2018E
Current Current

Source: World Bank, Kotak Institutional Equities, updated 31st May, 2017
Note:
a) From 2005-17, S&P BSE SENSEX PE is based on 12 month forward estimated EPS
b) For 2017 and 2018, we have calculated S&P BSE SENSEX PE based on estimates as of March 2017 and March 2018 end and used market cap as of May 31, 2017

¦ S&P BSE SENSEX EBITDA margins are stable / improving


S&P BSE SENSEX 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17

EBITDA Margin (%) 17.4% 17.0% 17.0% 16.8% 18.2% 18.0% 18.3% 18.7% 18.3% 18.1% 17.8% 19.1%

Source: BofAMIL, Note – EBITDA margins calculated above are excluding nancial stocks/companies in S&P BSE SENSEX

¦ Improving EBITDA margins, lower interest rates should lead to improved EPS / Pro t growth in coming years

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Investment Approach

¦ Focus on well managed small cap companies

¦ Businesses operating in a niche environment


Stock Universe
¦ Identify businesses at a relatively early stage in their life-cycle
1,231 Stocks

¦ Focus on quality metrics like ROCE & ROE

¦ Investments into growth companies with expanding businesses Market Capitalization Range
and improvement in pro tability Rs 200 Cr - 20,000 Cr
1,114 Stocks
¦ Seeking undervalued businesses

Quality & Valuation Criteria

Final Portfolio
50 - 60 Stocks

The current investment strategy is subject to change depending on the market conditions 12
Fund Facts

Total Equity & Equity Related Holdings (%) 90.8

Cash, Cash Equivalents and net Current Assets (%) 9.1

Total Number of stocks in the Portfolio 50

Top 5 Holdings (As a % of Total Holdings) 17.6

Top 10 Holdings (As a % of Total Holdings) 32.3

Portfolio Turnover Ratio (%) 30.6

Sharpe Ratio $* 0.25

Current Portfolio Beta $ 0.62

Overlap with index (%) 6.4

Portfolio Turnover Ratio is the percentage of a fund’s holdings that have changed in a given year. This ratio measures the fund’s trading activity, which is computed
by taking the lesser of purchases or sales and dividing by average monthly net assets.
The Sharpe Ratio, named after its founder, the Nobel Laureate William Sharpe, is a measure of risk-adjusted returns. It is calculated using standard deviation and
excess return to determine reward per unit of risk.
Beta is a measure of an investment’s volatility vis-a-vis the market. Beta of less than 1 means that the security will be less volatile than the market. A beta of greater
than 1 implies that the security’s price will be more volatile than the market.

For complete portfolio details refer www.hdfcfund.com


Source HDFC AMC, Bloomberg
$ Computed for the 3-yr period ended June 30, 2017. Based on month-end NAV.
* Risk free rate: 6.25% (Source: FIMMDA MIBOR)
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Fund Facts - Market Cap Break up
Market cap Range
Benchmark #
<500cr
1.66%
0%
4.81% 500 - 1000cr
0.6%

40.73% 1000 - 5000cr 72.3%


me
he

34.92% 5000 - 10000cr 17.0%


Sc

8.5%
16.62% 10000 - 20000cr
1.5%
1.96% >20000cr

Scheme Benchmark #

Average Market cap (Rs cr) 6,146 4,118

Weighted Average Market cap (Rs cr) 6,661 4,956

Median Market Cap (Rs cr) 4,941 3,346

For complete portfolio details refer www.hdfcfund.com; #NIFTY Free Float Small Cap 100 Index. Data as on 30th June, 2017.
Source: Bloomberg 14
Overweight/Underweight

37.7 Scheme Benchmark


OW
17.8

25.5
OW
12.6
19.9 20.2
OW
2.8 UW
16.0
9.5
12.9 13.2
UW 10.7
OW UW UW 9.4
8.5 9.0
2.6 2.6 6.5
6.9
4.3 1.5 4.1 2.0
0.4

Industrials Consumer Materials Information Energy Health Care Consumer Staples Financials
Discretionary Technology

Overweight Sectors Underweight Sectors

For complete portfolio details refer www.hdfcfund.com


Source Bloomberg, Sector classi cation based on GICS. For AMFI classi cation refer page no. 22. Data as on 30th June, 2017.
OW – Over Weight; UW – Under Weight 15
Fund Facts

Type of Scheme Open-ended Equity Scheme

Inception Date (Date of allotment) / April 3, 2008 / June 27, 2014


Managing since

Investment Objective To provide long-term capital appreciation by investing predominantly in Small & Mid Cap companies

Fund Manager $ Mr. Chirag Setalvad

Plans Direct Plan, Regular Plan

Options Under Each Plan: Growth & Dividend. The Dividend Option offers Dividend Payout and Reinvestment facility

Minimum Application Amount Purchase : Rs. 5,000/- and any amount thereafter
(Under Each Plan/Option) Additional Purchase : Rs 1000/- and any amount thereafter

Load Structure Entry Load:


Ÿ Not Applicable. Upfront commission shall be paid directly by the investor to the ARN Holder (AMFI registered Distributor)
based on the investors’ assessment of various factors including the service rendered by the ARN Holder.
Exit Load:
Ÿ In respect of each purchase / switch-in of Units, an Exit Load of 1.00% is payable if Units are redeemed / switched-out within 1 year
from the date of allotment
Ÿ No Exit Load is payable if Units are redeemed / switched-out after 1 year from the date of allotment

In case of systematic transactions such as SIP, GSIP, STP, Flex STP, Swing STP, Flexindex; Exit Load, if any, prevailing on the date of
registration/enrolment shall be levied.

Benchmark NIFTY Free Float Small cap 100 Index

$ Fund Manager Overseas investment –Rakesh Vyas


For further details, refer Scheme Information Document and Key Information Memorandum available on www.hdfcfund.com
and at Investor Service Centres of HDFC Mutual Fund 16
Asset Allocation Pattern

Under normal circumstances, the asset allocation of the scheme’s portfolio will be as follows:

Minimum Allocation Maximum Allocation Risk Profile of the


Types of Instruments
(% of Net Assets) (% of Net Assets) Instrument

Equities and equity related Instruments of


80 100
Small and Mid-Cap companies of which

High
80 100
Ÿ Small-Cap companies
Ÿ Mid-Cap companies 0 20

Equity and Equity related instruments other


0 20 Medium to High
than the above

Debt & Money Market Securities


0 20 Low to Medium
(Including securitized debt*)

*Investment in Securitized debt, if undertaken, would not exceed 20% of the net assets of the Scheme.

The scheme may seek investment opportunity in the ADR / GDR / Foreign Securities (max. 30% of net assets) & Foreign Securities (max 20% of net assets) subject
to SEBI (Mutual Funds) Regulations, 1996. The scheme may use derivatives (max 50% of net assets). Refer Disclaimer on Slide 23.

17
SIP Performance

SIP Investments Since Inception 7 year SIP 5 year SIP 3 year SIP 1 year SIP

Total Amount Invested (Rs.) 1,130,000 840,000 600,000 360,000 120,000

Market Value as on August 31, 2017 (Rs.) 2,847,974.57 1,684,735.52 1,046,408.02 487,949.91 137,500.10

Returns (Annualised) (%) 18.77% 19.53% 22.42% 20.78% 28.17%

Benchmark Returns (Annualised) (%) # 15.42% 17.38% 21.91% 20.62% 31.29%

Additional Benchmark Returns (Annualised) (%)## 11.18% 11.28% 12.16% 10.96% 20.18%

#NIFTY Free Float Smallcap 100 Index. ## NIFTY 50 Index


Past performance may or may not be sustained in the future. Assuming Rs. 10,000 invested systematically on the rst Business day of
every month over a period of time. CAGR returns are computed after accounting for the cash ow by using XIRR method (investment internal
rate of return) for Regular Plan - Growth Option. Load is not taken into consideration for computation of performance. The above investment
simulation is for illustrative purposes only and should not be construed as a promise on minimum returns and safeguard of capital.
18
Scheme Performance Summary

NAV as on 31st August,2017 Rs. 37.500 (per unit)

Value of Rs. 10,000 invested

Additional
Scheme Benchmark Benchmark Additional
Benchmark Scheme
Returns (%) Returns (%)# (Rs)# Benchmark (Rs)##
Returns (%)##

Last 1 year 22.69 25.55 12.88 12,269 12,555 11,288

Last 3 years 18.85 15.62 7.60 16,821 15,481 12,469

Last 5 years 22.49 19.65 13.52 27,594 24,533 18,861

Since inception 15.07 8.20 8.08 37,500 20,995 20,785

Past performance may or may not be sustained in the future. The above returns are of Regular plan - growth option. Returns greater than 1 year period
are compounded annualized (CAGR). Load is not taken into consideration for computation of performance. #NIFTY Free Float Smallcap 100## NIFTY 50.
Different plans viz. Regular Plan and Direct Plan have a different expense structure. The expenses of the Direct Plan under the Scheme will be lower to the
extent of the distribution expenses / commission charged in the Regular Plan. Returns as on 31st August, 2017. Scheme managing since June 27, 2014.
19
Other schemes managed by the Fund Manager
Cumulative Performance
Scheme Scheme managing since
1 year 3 year CAGR (in %) 5 year CAGR (in %)

Chirag Setalvad manages 9 schemes


Performance of Top 3 schemes managed by Chirag Setalvad

HDFC Long Term Advantage Fund~ Apr 02, 07 19.26 12.24 19.61

S&P BSE SENSEX 11.52 5.98 12.72


HDFC Retirement Savings Fund -
Feb 25, 16 17.06 N.A. N.A.
Hybrid-Equity Plan $
CRISIL Balanced Fund - Aggressive Index 11.78 N.A. N.A.
HDFC Midcap Opportunities Fund June 25, 07 17.11 19.94 26.48
NIFTY Free Float Midcap 100 Index 18.91 17.96 20.92
Performance of Bottom 3 schemes managed by Chirag Setalvad

HDFC Children’s Gift Fund - Savings


Apr 02, 07 8.48 10.69 11.54
Plan #

CRISIL MIP Blended Index 9.93 10.63 10.30


HDFC Multiple Yield Fund - Plan 2005^ Apr 02, 07 7.90 8.34 10.30
CRISIL MIP Blended Index 9.93 10.63 10.30

HDFC Retirement Savings Fund -


Feb 26, 16 11.19 N.A. N.A.
Hybrid-Debt Plan $

CRISIL MIP Blended Index 9.93 N.A. N.A.

Past performance may or may not be sustained in the future. The above returns are of Regular plan - growth option. Load is not taken into consideration for
computation of performance. ~Open Ended Equity Linked Savings Scheme with a lock-in period of 3 years. $Co-managed with Shobhit Mehrotra. ^ The Scheme is co-
managed by Chirag Setalvad (Equities) and Anil Bamboli (Debt). On account of difference in the type of the Scheme, asset allocation, investment strategy, inception
dates, the performance of these schemes is strictly not comparable. Top 3 and bottom 3 schemes managed by the Fund Manager have been derived on the basis of
since inception returns. Returns as on 31st August, 2017 Different plans viz. Regular Plan and Direct Plan have a different expense structure. The expenses of the Direct
Plan under the Scheme will be lower to the extent of the distribution expenses/ commission charged in the Regular Plan.
20
Product Labelling

Riskometer

This product is suitable for investors who are seeking*

Ÿ Capital appreciation over long term


Ÿ Investment predominantly in equity and equity related instruments of Small-Cap and
Mid-Cap companies

* Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

21
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Portfolio as on 30th June 2017. Sector classi cation as per AMFI. For complete portfolio details visit www.hdfcfund.com
1.5

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22
Disclaimer

The presentation is dated 15th September 2017 and has been prepared by HDFC Asset Management Company Limited (HDFC AMC) based on
internal data, publicly available information and other sources believed to be reliable. Any calculations made are approximations, meant as
guidelines only, which you must confirm before relying on them. The information contained in this document is for general purposes only and is
not an offer to sell or a solicitation to buy/sell any mutual fund units/securities. The document is given in summary form and does not purport to
be complete. The document does not have regard to specific investment objectives, financial situation and the particular needs of any specific
person who may receive this document. The information/ data herein alone are not sufficient and should not be used for the development or
implementation of an investment strategy. The same should not be construed as investment advice to any party. The statements contained
herein are based on our current views and involve known and unknown risks and uncertainties that could cause actual results, performance or
events to differ materially from those expressed or implied in such statements. Neither HDFC Asset Management Company (HDFC AMC) and
HDFC Mutual Fund (the Fund) nor any person connected with them, accepts any liability arising from the use of this document.

HDFC Mutual Fund/AMC is not guaranteeing returns on investments made in this scheme. The current investment strategy is subject to change
depending on the market conditions The recipient(s) before acting on any information herein should make his/her/their own investigation and
seek appropriate professional advice and shall alone be fully responsible / liable for any decision taken on the basis of information contained
herein. Past performance may not be sustained in the future. Investments in Small cap stocks are entail risk of loss of capital invested. Investors
are advised to take due caution while investing in this scheme.

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.

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