Small is Powerful!
¦ 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
For complete scheme related information refer page 16 onwards or the Scheme Information Document. 4
Why Small 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)
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
5
Why Small Caps? “Big things often have small beginnnings”
- Unknown
Scope for P/E Expansion
Under Researched : Limited Analyst Coverage Under Owned : Lower Institutional Holding
For small cap stocks, company speci c factors have a much higher impact than macro factors.
¦ Volatility exhibited by the Small Cap benchmark is in line with large and midcaps (see charts below)
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
¦ Within small caps there are large number of companies that show high returns and ones with low returns
¦ 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
0 to -20% 9 23 177 18 5 5 80 26
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
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
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
10
Equity Markets - Market cap to GDP near lows
India market cap to GDP ratio, calendar year-ends 2005-18 (%)
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
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
11
Investment Approach
¦ 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
Final Portfolio
50 - 60 Stocks
The current investment strategy is subject to change depending on the market conditions 12
Fund Facts
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.
8.5%
16.62% 10000 - 20000cr
1.5%
1.96% >20000cr
Scheme Benchmark #
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
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
Investment Objective To provide long-term capital appreciation by investing predominantly in Small & Mid Cap companies
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
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.
Under normal circumstances, the asset allocation of the scheme’s portfolio will be as follows:
High
80 100
Ÿ Small-Cap companies
Ÿ Mid-Cap companies 0 20
*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
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
Additional Benchmark Returns (Annualised) (%)## 11.18% 11.28% 12.16% 10.96% 20.18%
Additional
Scheme Benchmark Benchmark Additional
Benchmark Scheme
Returns (%) Returns (%)# (Rs)# Benchmark (Rs)##
Returns (%)##
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 %)
HDFC Long Term Advantage Fund~ Apr 02, 07 19.26 12.24 19.61
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
* 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
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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.
23