HDFC Index Fund is a large cap equity fund. The corpus of the fund is not as large as other funds from HDFC Mutual Fund. The fund invests almost 80-90 per cent of its corpus in equities, thus making it a risky investment bet.
Returns have been decent from HDFC Index Fund
Returns from the HDFC Index have been pretty decent in the last many years right since launch. In the last few years the returns from the fund has beaten the bank deposit rates and also benchmark indices. The last one year return of the fund has been 38 per cent, while the three year returns of the fund have been close to 22 per cent. Going forward much would depend on market movement for the fund to keep generating superior returns.
Portfolio of HDFC index Fund
The portfolio of HDFC Index Fund largely comprises blue chip stocks including the likes of ITC, ICICI Bank, Infosys, HDFC Bank, Reliance Industries and Tata Consultancy Services. Most of the amounts are invested in Sensex companies as the name of the fund suggests.
Should you invest in the scheme?
Bulk of the amount invested by the fund is in Sensex companies. What this means is if the Sensex rallies the net asset value of the fund could go up. At the moment the Sensex has rallied tremendously and investors have got decent returns. Year on year to get returns like in 2014 is ruled out. Most of the stocks in the portfolio are high quality names and leaders in their field. The fund therefore can give returns only if these stocks rally.
From a longer term perspective one can expect decent gains from the fund. We would like to reiterate that the markets have gone up tremendously in the last one year and to get returns like 20-30 per cent annually from the fund may be a little overstretched.