hdfc small & midcap fund - december 2015.pdf

8/17/2019 HDFC Small & Midcap Fund - December 2015.pdf

1/17

Potential Comes in all Sizes

December 2015

This Fund is suitable for investors who are seeking*:

Capital appreciation over long term.

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.

Riskometer


2/17

The Open Secret

• Small & Midcap stocks are often under-owned, under-researched and misunderstood.

• Stock picking with a long term fundamental view is a tough skill to master especially in

the midcap and small-cap space.

• Volatility in the short term can be high but a long term perspective helps to buy on

dips.

• Increased familiarity, larger size, changing fundamentals and better disclosures can

result in a re-rating of the business.

…Several examples in the past give us confidence that these secrets can be found “Again”.

2


3/17

Finding the next opportunities/niche companies.

A Specialty Textile

Manufacturer

A Stable Agri-chemicals

Provider

Niche textile manufacturer with a

strong export focus.

A rural business model focused on

distribution of agriculture inputs.

Rapidly growing business across

multiple geographies.

Follows an asset light business model

resulting in higher return on capital.

Capacity addition to cater to

domestic & international markets

completed.

Approach of "solutions for farmers"

rather than manufacturing/selling to

farmers .

Substantial scope for financial

performance improvement oncecapacity utilization increases.

Tie ups with global players for R&D

gives the company access to newspecialty products.

Common Characteristics

of good Small cap stocks.

• Attractively valued

• Niche Players.

• Good business models.

• Scope for rapid growth

in business.

3

Stocks/sectors referred above are illustrative and are not recommended by HDFC Mutual Fund/AMC. The Fund may or may not have any present or future positions

in these stocks.


4/17

Finding the next opportunities/niche companies.

A Fast Growing NBFCA Leading Auto Ancillary

Manufacturer

Well diversified NBFC focused on

urban customers

Market leader in specific automotive

components.

Significant improvements inoperations management through

effective technology usage.

Company has a high ROCE and freecash flow generating capability. The

company has a low debt/equity ratio.

Developed new business lines to

diversify loan book and expand

domestic footprint.

Long standing relationships with

OEM`s and a strong distribution

network across the domestic market

as well as rising export opportunities.

Expected to grow while

maintaining good profitability.

Strong engineering skills and stable

management.

Common Characteristics

of good midcap stocks.

• High quality.

• Market Leaders.

• Good Growth

Prospects.

•

High Return ratios.

4

Stocks/sectors referred above are illustrative and are not recommended by HDFC Mutual Fund/AMC. The Fund may or may not have

any present or future positions in these stocks.


5/17

Source: Morgan Stanley, Citi *Actual Figures.IIP Figures as of September 2015

CPI – Consumer Price Inflation, WPI – Wholesale Price Index, CAD – Current Account Deficit, MSP – Minimum Support Price

Indian Economy – On the Move...

• Falling inflation – low commodity

prices, stable INR, improving

supplies; Real rates of 3% indicate

lower yields going forward

• Recent IIP readings are encouraging

• Further, IIP capital goods growth

(10.5%) faster than IIP Consumer

durables. (8.4%)

• Steadily improving growth; Capex

should revive in FY16

By 2020, India is expected to be 5th largest economy in the

world and fastest growing as well

A stable, proactive, long term focussed Government, Coal & telecom auctions, gas pooling, DBT, GST (FY16),

Bankruptcy act likely, diesel deregulation, resolving stalled projects, roads and railway spending increased, etc.

FY 13 FY 14 FY 15 FY 16E FY 17E

CPI (Avg %) 10.2 9.5 5.9 5.0 4.8

WPI (Avg %) 7.5 5.9 2.1 -0.5 2.0

GDP Growth

(%) 5.1 6.9 7.3 7.5 7.8

Fiscal Deficit (%

GDP) 4.8 4.6 4.1 3.9 3.6

CAD (% GDP) -4.8 -1.7 -1.4 -1.0 -1.3

5


6/17

Equity Market Outlook

• India is one of the biggest beneficiaries of lower

commodity prices especially crude oil.

• Further, low inflation, improving CAD and fiscal

outlook and rising order backlogs in some key

infrastructure related industries point to a

steadily improving growth prospects of theeconomy, especially of the capex cycle.

• The policy direction is right and economy is

making good progress on most fronts.

• Improving margin outlook of corporates, likely

lower interest rates, soft commodity prices andreasonable valuations lead to a positive outlook

for equity markets over the medium to long

term.

• Merit in increasing allocation to equities (for

those with a medium to long term view) in a

phased manner and stay invested.

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

0

5

10

15

20

25

30

35

40

45

O c t 9 1

O c t 9 3

O c t 9 5

O c t 9 7

O c t 9 9

O c t 0 1

O c t 0 3

O c t 0 5

O c t 0 7

O c t 0 9

O c t 1 1

O c t 1 3

O c t 1 5

Roll PE (LHS) average (LHS)

BSE (RHS)

Source: CLSA

Reasonable P/E’s at cyclically low margins leads to

positive outlook for equities

6


7/17

Presenting


8/17

Investment PhilosophyGrowth Investing – Growth at a reasonable price

• Combination of attractive growth and reasonable valuations.

• Metric based investing looking at industry & company specific pointers.

• Involves higher risk and higher returns.

• Focus on well managed small & midcap companies operating in a niche environment

and those that are relatively at an early stage in their life-cycle.

• Investments are made in companies valued lower than their intrinsic worth with thehope of growth in intrinsic value and a narrowing of the gap to intrinsic value.

• Investments are typically made in growth companies with expanding businesses and

profitability.

8


9/17

Superior Growth to be driven by

• Presence in generally new & faster growing

segments

• Ability to gain share due to new technology,

better products / services etc.

• Small base and niche presence

For further details on investment strategy refer Scheme Information Document/Key Information Memorandum

Small Cap Mid Caps Large Caps

Research Available Limited Selective Good

Institutional

Ownership Low Selective High

The Fund invests in a mix of Small (50-75%) and Midcap companies (25-50%)

The Fund targets less discovered, high quality small and midcap companies that are growing well and available at

reasonable valuations

To identify less discovered companies

HDFC Small & Midcap FundA Small & Mid Cap Focused Investment Strategy

9


10/17

• Focus on creating a portfolio on a bottom up basis.

• Sector allocation: currently overweight Banks, Pharma, Auto and Industrial.

• Fund maintains a diversified portfolio of 50-70 companies.

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

HDFC Small & Midcap FundCurrent Investment Strategy

10

Risk Mitigants

Management risk is high Focus on competent and quality management

Access to funds is limited Focus on companies with strong balance sheets

Business quality Focus on companies with a strong business focusand niche businesses models

Suitable for specific market phases Maintain a diversified portfolio


11/17

Taking the SIP RouteSlow & Easy

Why SIP ?

• Imbibes financial discipline.

• Drops of water help fill a glass – Small and

regular investments build a corpus over time.

• Eliminates the need to time the markets.

• Enables setup and plan financial goals.

• Option to stop at anytime thus providing

flexibility.

• Aids in long term wealth creation.

Why an SIP in HDFC Small & Midcap ?

• An open ended Fund with a well defined

portfolio strategy.

• Targeted allocation to small and midcap stocks

with good growth and earnings potential.

• While the Fund offers a good risk reward

proposition in the medium to long term, short

term volatility is high.

11

Disclaimer: SIP does not assure a profit or guarantee protection against a loss in a declining market. HDFC Asset Management Company Limited/ HDFC Mutual

Fund/ are not liable for any financial decisions arising out of the use of this calculator and also they do not take the responsibility, liability, for any error or

omission or inaccuracy or for any losses suffered nor undertake the authenticity of the figures calculated on the basis of calculator. The user before acting on

any information herein should make his/her/their own investigation and seek appropriate professional advice and shall along liable for any decision taken on

the basis of information contained herein. In view of individual nature of tax consequences each investor is advised to consult his/her own professional taxadvisor.


12/17

12

Type of Scheme Open-ended Equity Scheme

Inception Date

(Date of allotment) April 3, 2008

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

Fund Manager $ Mr. Chirag Setalvad

Plans HDFC Small and Mid Cap Fund – Direct Plan, HDFC Small and Mid Cap Fund – Regular Plan

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

MinimumApplication Amount

(Under Each Plan/Option)

Purchase: Rs 5,000 and any amount thereafter

Additional Purchase: Rs 1,000 and any amount thereafter

Load Structure

Entry Load:

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:

• 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.

• No Exit Load is payable if Units are redeemed / switched-out after 1 year from the date of allotment.

Benchmark Index Nifty Smallcap1 00

$ Fund Manager Overseas investment –Rakesh VyasFor further details, refer SID and KIM available on www.hdfcfund.com and at Investor Service Centres of HDFC Mutual Fund

Fund Facts

12


13/17

Asset Allocation Pattern

13

*Investment in Securitised 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 18.

Type of Instruments Minimum Allocation

(% of Net Assets)

Maximum Allocation

(% of Net Assets)

Risk Profile of the

Instrument

Equity and equity related instruments of

Small and Mid-Cap companies of which

• Small-Cap companies

• Mid-Cap companies

75

50

25

100

75

50

High

Equity and Equity related instruments

other than the above

0 25 Medium to High

Debt and Money Market Securities(Including securitized debt*)

0 25 Low to Medium

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


14/17

Performance

Past performance may or may not be sustained in the future. Returns greater than 1 year period are compounded annualised (CAGR). The above returns are of growth

option. $ Adjusted for bonus units declared under the scheme # The Scheme is co-managed by Chirag Setalvad and Miten Lathia. +The Scheme is co-managed by Chirag

Setalvad (Equities) and Anil Bamboli (Debt). @Scheme performance may not strictly be comparable with that of its Additional Benchmark in view of balanced nature of the

scheme where a portion of scheme's investments are made in debt instruments. ^Scheme performance may not strictly be comparable with that of its Additional Benchmark

in view of hybrid nature of the scheme where a portion of scheme's investments are made in equity instruments. @@ Open Ended Equity Linked Savings Scheme with a lock-

in period of 3 years. Load is not taken into consideration for computation of performance. # * Erstwhile Morgan Stanley A.C.E. Fund. Fund taken over at the end of businesshours on June 27, 2014 1. Benchmark 2. Additional Benchmark . NAV at Inception for all the above schemes was Rs 10. 14

30 Sep 2014 to

30 Sep 2015

30 Sep 2013 to 30

Sep 2014

28 Sep 2012 to 30

Sep 2013

Since Inception

CAGR (in %)HDFC Small and Mid Cap Fund# * 25.785 11.06 55.38 0.87 13.47 25,785

Nifty Smallcap 100 Index1

5.87 80.47 -20.54 4.77 14,180

Nifty 50 Index2

-0.20 38.87 0.56 7.05 16,659

HDFC Balanced Fund @ 107.414 11.65 60.86 -3.66 17.07 1,07,414

CRISIL Balanced Fund Index1

4.38 28.89 1.86 NA NA

Nifty 50 Index2

-0.20 38.87 0.56 11.93 54,581

HDFC Mid- Cap Opportunities Fund 37.403 17.32 91.44 -6.26 17.29 37,403

Nifty Midcap 100 Index1

13.72 63.17 -10.69 10.17 22,283

Nifty 50 Index2

-0.20 38.87 0.56 7.83 18,662HDFC Capital Builder Fund# 193.804 7.59 61.63 -2.21 14.66 1,93,804

Nifty 500 Index1

3.59 46.08 -2.48 8.83 62,533

Nifty 50 Index2

-0.20 38.87 0.56 8.99 64,629

HDFC Long Term Advantage Fund @@ 225.068 -0.93 61.80 -0.73 23.50 2,25,068

S&P BSE SENSEX1

-1.79 37.41 3.27 13.54 65,080

Nifty 50 Index2

-0.20 38.87 0.56 13.23 62,501

HDFC Children's Gift Fund - Investment Plan $ @ 82.166 7.71 51.81 3.45 17.63 1,06,816

CRISIL Balanced Fund Index1

4.38 28.89 1.86 NA NA

Nifty 50 Index2

-0.20 38.87 0.56 13.18 60,848

HDFC Chi ldren's Gift Fund - Savings Plan $ ̂ 36.275 10.59 24.74 1.23 11.22 47,157CRISIL MIP Blended Index

110.72 15.45 3.20 NA NA

CRISIL 10 Year Gilt Index2

13.76 6.85 2.43 NA NA

HDFC Multiple Yield Fund- Plan 2005 +^ 25.168 6.31 22.93 3.33 9.54 25,168

CRISIL MIP Blended Index1

10.72 15.45 3.20 8.23 22,282

CRISIL 1 Year T - Bill Index2

8.86 8.35 5.66 6.09 18,202

Scheme

Value of investment of

Rs. 10,000 Since

Inception (Rs.)

Other Funds Managed by Chirag Setalvad, Fund Manager of HDFC Small & Midcap Fund

NAV as

on 30

Sept 2015

Discrete Returns in %


15/17

15

Glossary

ROCE – Return On Capital Employed

OEM – Original Equipment Manufacturers

R&D – Research & Development

PPAC – Petroleum Planning and Analysis Cell

G Sec – Government Securities

Smallcap – Companies whose market cap is equal to or lower than that of the stock with the

largest market cap in the Nifty Smallcap 100.

Midcap – Companies having a market capitalization equal to or lower than that of the stock

with the largest market cap in the Nifty Midcap 100.

P/E – Price to Earnings

EBIDTA – Earnings before interest depreciation taxes and amortization

CPI – Consumer Price Inflation


16/17

Disclaimer

The presentation is dated 10th December 2015 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 specificperson 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. 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.

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

DOCUMENTS CAREFULLY.

16 16


17/17

Thank You

hdfc small & midcap fund - december 2015.pdf

Documents