hsbc large and mid cap equity fund deck · s&p bse sensex –tri performance ... rbi repo rates...
TRANSCRIPT
Power meets great potential
HSBC Large and Mid Cap Equity Fund Deck(Large & Mid Cap Fund: An open ended equity scheme investing in both large cap and mid cap stocks)
July 2020
1
Summary
1. Why Equities ( slide no 2 to 6)
2. Benefits of combining Largecaps and Midcaps ( slide no 7 to 10 )
3. Large and Midcap Fund category - power meets potential with discipline ( slide no:11 to 13)
4. HSBC Large and Midcap Equity Fund (HLMEF)
1. Why HLMEF( slide no: 14-17)
2. Investment strategy ( slide no: 18-19)
3. Current portfolio and investment theme ( slide no: 20-24)
5. Who should invest ( slide no :25)
6. Key features ( slide no : 26)
2
Sharp equity market declines have been followed by recovery
Source: BSE, ACE MF, S&P BSE Sensex TRI data as at June 2020
For illustration purposes only. Past performance may or may not sustain, past performance does not guarantee the future performance.
Equity^ market performance across big events
Event led sharp equity market declines have been followed by significant rebounds and recovery over a long
term
3
Where are we today?
Reasonable equity valuations + low interest rates
Source: Bloomberg, MOSL, Data as at June 2020,
Past performance may or may not sustain and doesn’t guarantee the future performance
Valuations – Market cap to GDP %
52
82 83
103
55
95
88
7164 66
81
69
7983 79
56
71
FY0
5
FY0
6
FY0
7
FY0
8
FY0
9
FY1
0
FY1
1
FY1
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FY1
3
FY1
4
FY1
5
FY1
6
FY1
7
FY1
8
FY1
9
FY2
0
FY2
1E
Average of 75% for the period
3.25%3.35%
1271
5869
2577
5993
8660
10302
0
2000
4000
6000
8000
10000
12000
14000
0.001.002.003.004.005.006.007.008.009.00
10.00
Jun
-02
Fe
b-0
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Oct-
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Jun
-04
Fe
b-0
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Oct-
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Jun
-06
Fe
b-0
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Oct-
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-08
Fe
b-0
9
Oct-
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-10
Fe
b-1
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11
Jun
-12
Fe
b-1
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Jun
-14
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b-1
5
Oct-
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Jun
-16
Fe
b-1
7
Oct-
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Jun
-18
Fe
b-1
9
Oct-
19
Jun
-20
RBI Repo rates vs Equity market (Nifty 50)
RBI Repo Rate (LHS) RBI Reverse Repo Rate (LHS) Nifty 50 (RHS)
4.5%4.4%~4.6x
Repo/Reverse repo @ multiyear lows~2.3xRepo
Reverse
Repo
Reverse Repo
Repo
Low equity valuations and multiyear low interest rates
offer an ideal scenario for equity investments
4
India’s equity market moves with earnings
Source: Ace MF, MOSL, Bloomberg, Data as at June 2020, E – Estimates, Nifty 50 TRI index as of 31 March for respective financial years.
Past performance is not indicative of future performance, past performance may or may not be sustained in the future
FY01 to FY20, Nifty EPS growth is 10.3% CAGR, while Nifty TRI delivered ~12.1% CAGR returns
73 7892
131
169184
236
281251 247
315
348369
406 415397
426454
483 472
454
637
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
FY
01
FY
02
FY
03
FY
04
FY
05
FY
06
FY
07
FY
08
FY
09
FY
10
FY
11
FY
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FY
13
FY
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FY
15
FY
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FY
17
FY
18
FY
19
FY
20E
FY
21E
FY
22E
0
100
200
300
400
500
600
700
Nifty EPS (INR)
5
0
100000
200000
300000
400000
500000
600000
700000
800000
900000
1000000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Nifty 100 TRI
Nifty Midcap 150 Index TRI
Debt
Gold
Despite volatility, equities one of the best performing asset classes
over a long term, if one holds through market correction phases
Equities delivered 2.8X returns compared to Debt and 1.3X compared to Gold
• Equities have consistently delivered above average returns in the long-term over other asset classes such as
debt and gold
• Equities are inherently volatile in the short run, patience is the key to build wealth from equities over a long term
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
Growth of Rs. 100,000 since 2005
Source: NSE, LBMA, CRISIL, Returns till calendar year end, Data as at December 2019
The above chart is provided for illustration purpose only
Equity, debt and gold represented by Nifty 100 TRI, CRISIL 10 Year Gilt Index and LBMA prices converted into the rupee respectively.
Nifty Mid Cap 150 index performance is also added here for reference
Chart highlights growth of Rs 100,000 in each asset class over 15 years until bull market
639918
703511
520802
242971
6
Useful reminder: ‘power of compounding’
The above chart is provided for illustration purpose only
Source: BSE, CRISIL, Equity represented by S&P BSE Sensex, CY Data until calendar year end, Data as at December 2019
* Average of daily rolling CAGR for 5-year holding period of S&P BSE Sensex since CY Jan 1980 - Dec 2019
• Equity has returned average ~16% CAGR* on 5 year rolling basis in the past 40 years
Investment in equity has delivered ~2X multiplier effect every 5 years
1.0 2.1 4.4 9.319.5
40.9
85.8
180.3
378.7
0 5 10 15 20 25 30 35 40
Investment horizon
Potential growth for investment of Rs.100,000
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
7
Why Large Caps? – consistency is the key
For illustration purpose only.
Source: NSE, CRISIL, CY data as at December 2019
Large Cap index is represented by Nifty 100 TRI, Return distribution based on a daily rolling returns of various holding periods. Period considered: CY January 2005 – December 2019
Large Caps offer lower probability of delivering negative returns within equities
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
Lower volatility
Stable earnings growth
Well researched
Well-owned
Reasonable valuations
Large Cap features
4%0% 0% 0%
35% 33%
25%
18%
49%
59%
75%
82%
12%7%
0% 0%
3 years 5 years 7 years 10 years
Returns distribution of large caps
Less than 0% 0% to 10% 10% to 20% More than 20%
8
Why Mid Caps? – long term growth
For illustration purpose only.
Source: NSE, CRISIL, CY data as at December 2019
Mid Cap index represented by Nifty Midcap 150 TRI, Return distribution based on a daily rolling returns of various holding periods. Period considered: CY January 2005 – December 2019
Mid Caps offer more probability of delivering high growth
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
Above average performance
Earnings acceleration
Under-researched
Under- owned
Diversity and alpha
Mid Cap features
12%
2% 0% 0%
24%27% 26%
1%
29%
37%
65%
90%
35% 34%
9% 10%
3 years 5 years 7 years 10 years
Returns distribution of Mid Caps
Less than 0% 0% to 10% 10% to 20% More than 20%
9
Source: AMBIT Capital, Bloomberg, data as at June 2020
The above chart and names of the stock / companies are provided for illustration purpose only and represents historical data without having any regards to their future performance.
Source - Ambit Capital Research, The study has gathered a list of Mid Cap stocks which have entered Nifty. It has given a market cap journey of Mid Cap stocks for 5 years before the inclusion in
Nifty index. t-0 represents the year in which the stock has been included in Nifty. t-1 is 1 year before the inclusion in Nifty. Similarly going down to t-5 indicates the market cap of Mid Cap stock 5
years before the inclusion in Nifty. The study has taken an average market cap of all such stocks for these 5 periods which is shown in the chart below. Past performance may or may not sustain
and doesn’t guarantee the future performance. Further, it does not constitute investment research, investment advice or a recommendation to any reader of this content to buy or sell investments.
Mid Caps progress in size before Nifty inclusion
Large caps of tomorrow
– Historically, Nifty’s constituents change by 50% every decade
– Midcaps of today may graduate to become the large caps of tomorrow thereby, replacing the current Nifty
constituents
– Midcaps are an ideal way to gain exposure to some of the rapidly growing industries and business
Over the last 3 years some of the mid cap stocks have become Large caps and entered Large cap indices
But 5 years prior to their inclusion, they were small or mid caps, much smaller in size and much less discussed!
Early exposure to Mid Caps provides access to rapidly growing businesses
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
e.g. Bajaj Finance – market cap grew by ~22X in 5 years before the inclusion in Nifty
~Rs.94 bn
Aug 2017~Rs.60 bn~Rs.11 bn
~Rs.4 bn
Aug 2012
Rs. 133 bn161
273
Rs. 394 bn
-
50
100
150
200
250
300
350
400
450
t-5 t-3 t-1 t-0
Av
era
ge M
cap
(R
s b
n)
Average progress of a midcap stocks market cap journey before Nifty50 inclusion (Rs bn)
(5 years before Nifty inclusion) (Nifty inclusion year)
10
0
200
400
600
800
1000
Au
g-1
0
Fe
b-1
1
Au
g-1
1
Fe
b-1
2
Au
g-1
2
Fe
b-1
3
Au
g-1
3
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g-1
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0
Aurobindo Pharma
0
1000
2000
3000
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6000Jan
-15
Jun
-15
Nov-1
5
Ap
r-16
Se
p-1
6
Fe
b-1
7
Jul-
17
Dec-1
7
Ma
y-1
8
Oct-
18
Ma
r-1
9
Au
g-1
9
Jan
-20
Jun
-20
Bajaj Finance
0
20000
40000
60000
80000
100000
Jun
-11
Dec-1
1
Jun
-12
Dec-1
2
Jun
-13
Dec-1
3
Jun
-14
Dec-1
4
Jun
-15
Dec-1
5
Jun
-16
Dec-1
6
Jun
-17
Dec-1
7
Jun
-18
Dec-1
8
Jun
-19
Dec-1
9
Jun
-20
MRF
0
5000
10000
15000
20000
25000
30000
35000
Jun
-11
Dec-1
1
Jun
-12
Dec-1
2
Jun
-13
Dec-1
3
Jun
-14
Dec-1
4
Jun
-15
Dec-1
5
Jun
-16
Dec-1
6
Jun
-17
Dec-1
7
Jun
-18
Dec-1
8
Jun
-19
Dec-1
9
Jun
-20
Eicher Motors
Today’s Mid Caps can add alpha to your portfolio
Yesterday’s Mid Caps are today’s Large Caps
Stock growth
of 8.1X
since Jan ‘15
The stock named above is for illustration purposes only and does not constitute investment research, investment advice or a recommendation to any reader of this content to buy or sell investment product.
Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed in this report and
should understand that the views regarding future prospects may or may not be realised.
Currently in the portfolio, does not guarantee the position in the future. (Please refer latest portfolio for the reference)
Past performance may or may not be sustained in the future, Past performance is not indicative of future performance.
The returns provided above have been rounded off and hence there may be minor differences between point-to-point returns vis-a-vis returns indicated above. Data as at June 2020
Stock growth
of 13.6X
Since Jun ‘11
Stock growth
of 8X
Since Aug ‘10
Stock growth
of 9.1X
Since Jan ‘11
Mutual fund investments are subject to market risks, read all scheme-related documents carefully.
• Many Mid Caps have now become Large Caps and few such stocks have also been a part of HSBC Mutual
Fund’s portfolio across equity funds
11
When power meets great potential
Large Caps complement Mid Caps and provide strength to a growth portfolio
Volatility of equities
can be kept under
check with stability
of Large Caps
Mid Caps can
provide necessary
high growth potential
engine to a portfolio
Right mix of Large
Caps & Mid Caps can
deliver higher growth
with lesser volatility
Power of Large Caps Potential of Mid CapsPower meets
great potential
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
12
Large & Mid Cap index offer relatively lower volatility
• Stability of Large Caps mitigate volatile nature of Mid Caps in Large and Mid Cap Index (LMC)
Source: NSE, CRISIL, CY data as at December 2019
For illustration purpose only
Risk and Returns based on rolling returns of various holding periods. Period considered: CY January 2005 – December 2019
Large and Mid Cap Index (LMC) represented by Nifty LargeMidcap 250 Index TRI, Large Cap index is represented by Nifty 100 TRI, Mid Cap Index is represented by Nifty Midcap 150 TRI
Volatility represented by annualised standard deviation based on daily returns
Consistent growth of Large Caps and Mid Caps offer better risk adjusted performance
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
12.0% 12.2% 11.8% 12.1%12.9% 13.4% 12.8% 13.3%14.0% 14.8% 13.9% 14.6%
8.9%
5.9%
3.6%
2.7%
11.3%
7.1%
4.8%
2.9%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
3 years 5 years 7 years 10 years
Performance and Volatility - Large and Mid Cap Index
Nifty 100 TRI Average Returns Nifty LargeMidcap 250 Index TRI Nifty Midcap 150 Index TRI
Nifty 100 TRI Volatility (RHS) Nifty LargeMidcap 250 Index TRI Volatility (RHS) Nifty Midcap 150 Index TRI Volatility (RHS)
ad
dit
ion
al ri
sk in
mid
cap
s
ad
dit
ion
al ri
sk
inm
id c
ap
s
ad
dit
ion
al ri
sk
inm
id c
ap
s
13
Exposure in Mid Cap differentiates LMCFs vs MCFs
Source: Ace MF, Data as at June 2020, Large & Mid Cap Fund category schemes and Multi Cap Fund category schemes data is considered here
• Multi Cap funds (MCFs) category average exposure to Mid Caps is on lower side at ~15.6% on an average,
while Large and Mid Cap Funds (LMCFs) category average exposure to Mid Caps is on higher side at ~37%
Minimum exposure of 35% to Mid Caps can provide growth advantage over a long term
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
54
54
53
53
49
49 52
52
52
53
37
37
37
37
39
39 36
37
36
36
0
10
20
30
40
50
60
70
80
90
100
Se
p-1
9
Oct-
19
Nov-1
9
Dec-1
9
Jan
-20
Fe
b-2
0
Ma
r-2
0
Ap
r-20
Ma
y-2
0
Jun
-20
LMCF - category average - Mcap weight%
Largecap Midcap
70
70
71
70
67
66 68
67
67
67
15
15 15
16
17
18 17
17
17
15
0
10
20
30
40
50
60
70
80
90
100
Se
p-1
9
Oct-
19
Nov-1
9
Dec-1
9
Jan
-20
Fe
b-2
0
Ma
r-2
0
Ap
r-20
Ma
y-2
0
Jun
-20
Multicap - category average - Mcap weight%
Largecap MidcapMidcap avg. Midcap avg.
14
HSBC Large and Mid Cap Equity Fund(Large & Mid Cap Fund: An open ended equity scheme investing in both large cap and mid cap stocks)
15
Why invest in HSBC Large and Mid Cap Equity Fund (HLMEF)?
Power of consistency and stability
HLMEF offers consistency with an exposure to Large Cap stocks which are known to be stable
compounders
Potential of high growth
HLMEF’s allocation to Mid Cap stocks offers potential of above average growth
Power meets great potential
The fund offers power of consistent Large Caps and potential of growing Mid Caps with an optimal
allocation through the proprietary PBRoE investment tool of HSBC Global Asset Management
Benefit from discipline
Minimum 35% allocation in each (Large Cap and Mid Cap) helps in instilling discipline and gain from it
Subject to relatively lower volatility
Less volatile Large Caps can restrict funds downside and encourage investors to remain invested for
longer timeframe
Gain from the mix of power of Large Caps and growth potential of Mid Caps with HLMEF
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
16
HSBC Large and Midcap Equity Fund – primary thought process
Our thought process is as follows
• The key theme of the portfolio has been to be with sector leaders across market capitalisation and as they
would gain from market share and profit pool consolidation. Thus all companies will be dominant players in
their respective sectors.
• We would be looking to be in large caps where scale will be an advantage (like in banks/financials) while for
midcaps the focus will be on sector leaders or niche players in their respective businesses.
• In sectors like retail, consumer durables, specialty chemicals etc. there are sector leaders and niche players
from midcap and smallcap. These sectors may not be represented by largecap names. However, they provide
tremendous market opportunity and can exhibit sustainable profit growth.
• In certain other cases like that of healthcare, we have mix of large and midcaps as there are players in hospitals
or diagnostics which are midcap.
• Also in some cases like financials which is dominated through select large Private Banks, we can look to have
niche regional players (regional banks with strong liability franchise and capital adequacy) and select NBFCs
with strong parentage. This is more from a bottom up perspective.
• We would be focusing on dominant players in their respective sectors, exhibiting sustainable profitability and are
available at reasonable valuations.
17
• Type of scheme - Large & Mid Cap Fund - An open ended equity
scheme investing in both large cap and mid cap stocks.
• Large and Mid Cap focus - As the name suggests, the scheme
aims to focus on Large Cap and Mid Cap stocks.
• Minimum investment - The fund will hold a minimum 35% of the
corpus in Large Cap companies, while another 35% will be
deployed in Mid Cap companies. There is a provision which allows
HLMEF to invest 0% to 30% in other than Large and Mid Cap
companies and 0% to 20% in Debt & Money Market instruments
(including Cash & Cash equivalents)
• Benchmark - NIFTY LargeMidcap 250 TRI
A solution to generate better risk adjusted performance
The investment list above is not exhaustive and for illustration purpose only.
35%-
65%
35%-
65%
Minimum and
maximum
investment in equity
& equity related
instruments of Large
Cap stocks between
35% to 65% of total
assets
Minimum and
maximum
investment in equity
& equity related
instruments of Mid
Cap stocks
between 35% to
65% of total assets
HLMEF’s focus on Large and Mid Caps offer dual advantage of Consistency and Growth
HSBC Large and Mid Cap Equity Fund (HLMEF)
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
18
HSBC Large and Mid Cap Equity Fund (HLMEF’s) investment approach
Optimal market cap allocation – exposure to two market cap classes – Large and Mid Caps
to strike the right balance between Stability and Growth
Blended strategy - A top down and bottom up approach will be used to invest in equities. Sector
agnostic style of investments with a strategy to build an actively managed diversified portfolio of
Large and Mid Cap stocks having great potential using PBROE valuation framework
Investment style - HSBC Large and Mid Cap Fund aims to offer a potential quality mix of Large
Caps and Mid Caps (35% to 65% each) with a provision to invest 0% to 30% in to other than Large
Cap and Mid Cap companies. The fund has a provision to invest across value, growth and market
capitalisations.
HLMEF aims for optimal market cap allocation within Large and Mid Caps
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
19
How do we construct a portfolio?
Inflated Buy Growth Buy
Value BuyAttractive
Buy
RoE of stocks
PB
of
sto
cks
Underweight / Overweight position of market cap segments
PBRoE: PB – Price to book (Valuations) vs RoE - profitability
For illustrative purposes only
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
Placement of stocks through proprietary PBRoE process makes it more efficient
20
Data as on 30 June 2020
HSBC Large and Midcap Equity Fund (HLMEF)Fund Portfolio
21Data as at June 2020
Past performance may or may not sustain and doesn’t guarantee the future performance
Current investment theme
Economic impact of COVID-19 can be classified into lockdown phase and the post lockdown phase.
In the post lockdown phase, the markets have begun to look forward to resumption in supply as well as
recovery in demand.
At the moment, the focus of the market is on companies which would revive quickly while once the pandemic
is over and the economy returns to normalcy then the focus would be on companies that would thrive.
Disruptions have created long term investment themes. Each set of crises have seen new trends emerging
from the scene.
COVID-19 being an unprecedented, we believe that there would be an emergence of a new normal with
impact felt across industries (though the impact will not be uniform).
Even before this disruption, the most prominent theme that drove our portfolio construction view was that of
profit pool migration towards market share gainers. Due to the COVID-19 disruption, this process of profit
pool migration towards dominant players will accelerate.
This is leading to big companies becoming bigger and stronger. This theme was / is visibly across many
sectors – notably among Financials, Telecom, Real Estate, Airlines etc.
The above trend would be there in most sectors but it would become more visible in more disrupted sectors
like Travel, Entertainment, Hospitality, Construction etc.
From a medium to long term perspective, the current phase of disruption shall also pave way for accelerated
digital adoption by consumers as well as enterprises.
We see telecom, internet economy, ecommerce, technology vendors etc to benefit from this disruption.
Another long term theme is that of diversification of the global supply chain due to ‘China + 1’ strategy which
could be adopted by corporates as well as economies and India could stand to benefit out of that.
Disruptions have created long term investment themes
22Data as at June 2020
Past performance may or may not sustain and doesn’t guarantee the future performance
Current investment theme
In the short term, we are more positive on sectors that can exhibit revenue and earnings resilience as the
impact of the Pandemic and the resultant lockdown in the economy is not uniform across sectors.
We believe that in the near term, growth will be scarce and the balance sheet strength of the companies will be
challenged in a year like the current one. So a company that is displaying growth in earnings and having
balance sheet strength will command a premium and market would be willing to pay.
We believe that the revenue and earnings resilience is most likely to be demonstrated by segments that are in
the business of providing basic and essential products/services. (Example: Healthcare and Telecom). We have
a positive view of these sectors.
We are also moderately positive on companies/sectors that can demonstrate faster recovery in case of an
economic rebound. This would be demonstrated by sectors where there would pent up demand post the
disruption phase. So, as and when the normalcy returns, so would the sales for those companies / sectors. We
are using the correction to reorient the exposure within the Consumer Discretionary space which would be a
beneficiary of this pent-up demand. We are more positive on Consumer Goods as against Consumer Services
part of the discretionary basket at this juncture.
We are also positive on the beneficiaries of the global supply chain diversification, away from China to India.
(e.g. Specialty Chemicals).
We are also moderately positive on companies which would be beneficiaries of a benign crude oil price
environment. These would be sectors where their raw material prices are linked to crude price ( like paints,
PVC pipes).
Currently, we believe that private sector capex as well as government capex will get delayed and we hold
negative view on the sectors dependent on capex. We also have negative view on labour intensive sectors
such as construction, travel, hospitality etc.
In the short term we are more positive on companies that exhibit earnings resilience
23Data as at June 2020
Current portfolio positioning
HSBC Large & Mid Cap Equity Fund (HLMEF) positioning
Sector allocation:
– The fund is overweight in Healthcare, Telecommunication and Consumer Discretionary sectors.
– The fund is underweight in Industrials, Energy, Materials and Utilities sectors.
– The fund has a neutral position in Consumer staples, Financials, Technology, Real estate sectors.
Market Capitalisation Mix:
Currently the allocation to large/mid/small caps are at 59.6%/37.0%/0.6% compared to
59.7%/37.5%/nil in the previous month.
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
HLMEF is overweight in Healthcare, Telecom and Consumer Discretionary sectors
24
Current key focused sectors in HLMEF
Data as at June 2020, OW – Overweight, EW – Equal Weight
Sectors Comments
Healthcare
We are overweight on account of the expected resilience in earnings and also ability to retain the demand in the
current environment compared to other sectors. Recent approval of facilities by the US FDA will improve the
prospects of US business of investee companies. We also believe that the focus of buyers in the US will also be to
ensure steady supply of generic drugs, whereas in the past, price reduction was the only focus. This should ease
pricing pressure for Indian companies as well as give them higher visibility of demand. Domestic business will see a
modest growth as chronic segment will be stable but acute segment will show a decline. Stabilization of raw material
supplies from China has eased pressure on raw material sourcing. We have increase our exposure to the sector,
primarily through companies having US generic business as well as domestic business. Our exposure to pathology
labs is under anticipation that their demand would recover once lockdown is lifted as their services are largely non-
discretionary.
Telecom
Services
Telecom is one sector that will see very limited impact of the lock-down in the country owing to the essential nature
of the service. Looking beyond this crisis period, the telecom sector continues to be a beneficiary of consolidation
and tariff improvement. We see profitability of the sector coming back strongly and the post consolidation phase
would benefit players who are better positioned on network / spectrum and also with better access and ability to
deploy future capital. Our preference is for players with relatively stronger balance sheet and showing better
execution on the ground.
Consumer
discretionary
The fund is overweight in sectors which can benefit from pent up demand, especially consumer goods (like
durables, jewellery, kitchen appliances, passenger vehicles etc.). Our exposure is through market leaders which
should also benefit from market share gains. We also have exposure to tyre industry in the auto sector, which will
also benefit from replacement demand.
25
Who should invest in HSBC Large and Mid Cap Equity Fund (HLMEF)?
Source – HSBC MF, Note - Above list of categories in the chart is an indicative list and is not exhaustive #Typical minimum investment horizon for investors, *There were 2 instances on July 16, 2013 and July 24, 2013 when the liquid funds gave negative one-day return due to tightening of liquidity by RBI1 An open ended debt scheme investing in instruments with Macaulay duration between 4 to 7 years 2 An open ended debt scheme investing in government securities across maturity3 An open ended short term debt scheme investing in instruments with Macaulay duration between 1 year and 3 years
RE
TU
RN
Liquid Funds #
Short Duration Funds 3
Gilt Funds 2
RISK
Long Duration Funds 1
Equity Hybrid Funds
Dynamic Bond Funds
HSBC Large and Mid cap Equity Fund
Large Cap Funds
Mid / Small Cap Funds
HSBC Large and Mid Cap Equity fund is placed below Mid, Small Cap and Thematic funds
Thematic Funds
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
Aggressive investors
HLMEF is well suited for aggressive investors.
It provides above average return potential with
relatively less volatility
Moderately Aggressive investors
The fund is well suited for an informed investor
who is looking for adequate exposure to
equities at lesser risk
Disciplined equity investors
HLMEF is best suited for investors looking for
an optimal market cap allocation
26
Fund Name HSBC Large and Mid Cap Equity Fund
Benchmark NIFTY LargeMidcap 250 TRI
Minimum
Application
Amount
Rs 5,000/- per application
Minimum
Application
Amount
(SIP)
Minimum Investment Amount - Rs. 500 (monthly)
TypeLarge and Mid Cap - An open ended equity scheme
investing in both large cap and mid cap stocks
Plans /
Options /
Sub options
Regular, Direct plans / Growth, Dividend / Payout,
Dividend Reinvestment
Loads
(including
SIP / STP
wherever
applicable)
Entry Load* : Nil
Exit Load:– Any redemption / switch-out within 1
year from the date of allotment: 1%
No Exit Load will be charged, if units are
redeemed/switched-out after 1 year from the date of
allotment. ^
SIP/STP/SWP AvailableFund
ManagersNeelotpal Sahai and Amaresh Mishra
^The exit loads set forth above is subject to change at the discretion of the AMC and such
changes shall be implemented prospectively
*In terms of SEBI circular no. SEBI/IMD/CIR No.4/ 168230/09 dated June 30, 2009, no entry
load will be charged by the Scheme to the investor effective August 1, 2009. No exit load (if any)
will be charged for units allotted under bonus / dividend reinvestment option.
HSBC Large and Mid Cap Equity Fund (HLMEF)
Investment Objective - To seek long term capital growth through investments in both large cap and mid
cap stocks. However, there is no assurance that the investment objective of the Scheme will be
achieved.
27
Disclaimer
This document provides a high level overview of the recent economic environment. It is for marketing purposes and does not constitute investment research, investment
advice or a recommendation to any reader of this content to buy or sell investments. It has not been prepared in accordance with legal requirements designed to promote
the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination.
This document has been prepared by HSBC Asset Management (India) Private Limited (HSBC) for information purposes only and should not be construed as an offer or
solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information contained in this document (including that sourced from third parties), is
obtained from sources HSBC, the third party believes to be reliable but which it has not independently verified and HSBC, the third party makes no guarantee,
representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. The information and opinions contained within
the document are based upon publicly available information and rates of taxation applicable at the time of publication, which are subject to change from time to time.
Expressions of opinion are those of HSBC only and are subject to change without notice. It does not have regard to specific investment objectives, financial situation and
the particular needs of any specific person who may receive this document. Investors should seek financial advice regarding the appropriateness of investing in any
securities or investment strategies that may have been discussed or recommended in this report and should understand that the views regarding future prospects may or
may not be realized. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain
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HSBC Asset Management (India) Private Limited, 16, V.N. Road, Fort, Mumbai-400001
Email: [email protected]
Mutual fund investments are subject to market risks, read all scheme-related documents carefully.