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Capital goods bets drive outperformance of this fundCheenu Gupta, HSBC MF, Mumbai

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Small cap valuations have run up significantly, but strong earnings growth is keeping PEG still around 1 for many growth stocks in this space. With Indian interest rates having peaked, those headwinds are turning into tailwinds – especially when the rate cut cycle will commence.

HSBC Large & Midcap Fund has delivered a strong top quartile performance over last 12 months, driven by sizeable allocations to capital goods, manufacturing, auto ancillaries. Cheenu continues to see many domestic names in these sectors at PEGs of around 1 though MNC names are now looking quite expensive.

Cheenu is shifting BFSI allocations from large banks to well managed NBFCs, who she expects will benefit from a declining interest rate environment. In the IT space, she is focusing on bottom-up mid and small cap picks while remaining underweight on the IT heavyweights.

HSBC ELSS Fund has suffered relatively on performance due to its benchmark oriented allocations to large, mid and small caps in the midst of a big rally in smaller stocks. The fund has since trimmed positions in large caps to 65% and increased correspondingly in mid and small caps.

Cheenu continues to be bullish on capital goods/manufacturing, auto/auto ancillaries and select consumer discretionaries. She is underweight oil/gas and consumer staples.

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Mohsin Bijepuri ARN NO :33913 Chennai , 24 Sep 2023

Good conversation with useful insights into the composition of L&M & ELSS funds with focus on specific sectors.

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