HDFC's new fund can short stocks up to 25%: Can it make money when markets fall?

HDFC Mutual Fund has entered the Specialised Investment Fund (SIF) segment with a new hybrid long-short strategy that can take short positions of up to 25% of its net assets through derivatives. The fund aims to manage volatility and generate returns across different market conditions, including periods when stock markets are falling or moving sideways.

The H-SIF Hybrid Long-Short Fund, launched on November 13, 2026, is positioned as an Arbitrage+ strategy combining equity, debt, arbitrage opportunities and derivatives. Its New Fund Offer (NFO) will remain open until November 27.

How does the long-short strategy work?

Unlike traditional long-only equity strategies, which primarily benefit from rising stock prices, a long-short approach combines investments expected to appreciate with positions designed to benefit from declining prices or offset portfolio risks.

HDFC's strategy proposes a core portfolio comprising debt securities, arbitrage opportunities and Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).

Around this core, the fund can use derivatives for hedging, earning option premiums and taking limited short positions.

Short exposure is capped at 25% of net assets, allowing the fund to potentially offset some losses during market corrections.

However, short positions can also generate losses if markets move against them.

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Can it generate returns during market declines?

The strategy seeks returns from multiple sources, including interest income, arbitrage spreads, option premiums and selective participation in corporate events such as IPOs, buybacks, open offers and mergers.

Rather than relying entirely on market direction, HDFC aims to create a relatively steady return profile across flat, mildly rising and volatile markets.

Paul S Parampreet, Fund Manager–Equities, HDFC Asset Management Company, said, “Our focus is on building a portfolio that does not rely on a single source of return.”

He added, “While the core exposure is meant to anchor the portfolio, derivatives would allow us to manage risk actively and endeavour to benefit when volatility is elevated.”

However, the strategy does not guarantee positive returns during market declines or protection against capital losses.

HDFC H-SIF Hybrid Long-Short Fund: Key details

Who can invest?

The minimum investment is ₹10 lakh across SIF strategies at the PAN level. Accredited investors can invest ₹10,000, subject to applicable conditions.

Subscriptions are available daily, while redemptions are permitted on Mondays and Wednesdays.

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An exit load of 0.5% applies to redemptions or switches within 90 days, with no exit load thereafter.

HDFC recommends an investment horizon exceeding 18 months.

What are the risks?

Despite its hedging approach, the fund carries market, liquidity and capital-loss risks.

Investors should assess their risk appetite, liquidity requirements and investment horizon before committing funds, as derivatives-based strategies cannot eliminate market uncertainty.

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