Reliance Growth is one of the oldest equity funds in the equity diversified category, which has beaten the benchmark index BSE 100. In the last decade, it has outperformed the BSE 100 returns?in seven out of ten years. It is currently rated as a four-star fund by value Research, which indicates above average performance on a risk adjusted return basis. But over the past one to two years, it has been slipping in performance.
Just about in November 2009, it was a five-star fund, the highest rating given to a fund in any category. But then, it slipped one notch in ratings. The fund perhaps has grown too big to be managed efficiently?its corpus is over Rs 7,000 crore. The fund invests across market capitalisation of companies and historically underperformed in a bear market. Even 2008 was not a good year, when the fund gave a negative return of 54.1% as compared to 1.2% for BSE 100. While existing investors can stay put, fresh investments could be done solely as a diversification measure. Reliance MF is still among the top equity fund managers in the country.
Return charts: In the bearish years of 2000 and 2001, the fund gave a negative return of over -39% and -18% respectively against its benchmark returns of 16% and 4%. However from then on, it has consistently improved its performance till 2007 and attracted more number of investors into the schemes. From the year 2003 till 2007 its returns were double its benchmark index in all years except one. For example in 2003, BSE 100 gave the return of 70% while the fund gave returns of over 155%. However, the fund fared badly in 2008. But again in 2009 it rebounded and gave returns of 97% as against benchmark returns of 12%.
The fund remains at top of the returns charts over the five-year and seven-year period, largely because of its good performance earlier. However, over a period of time it has lagged its peers. Sunil Singhania, fund manager of Reliance Growth says, ?It is not a question of remaining at the top every year, though we have been behind in the short term. But our main aim will always remain to give better returns year after year and attract more numbers of investors.?
Diversified portfolio: The fund keeps a diversified number of stocks?41 stocks as on 31 March 2010. None of the stocks exceed 5% of portfolio value and the top ten holdings constituted 30% of its portfolio holdings?one of the reasons for the fund to receive an average risk rating. In terms of market capitalisation, it is in favour of mid and small cap stocks. While large cap stocks constituted 40% of the portfolio, midcap comprised 44% and small 16%.
Financials, energy and healthcare stocks lead the pack among the sectors in favour. Lupin, Jindal Saw, Bank of Baroda, State bank of India and ICICI Bank were its top five holdings.
Stable management team: The fund manager usually stays invested?its latest cash holdings were around 7%. Singhania has been managing the fund since 2004, a positive for the investor since it brings stability. The fund manager follows growth strategy but is emphatic about the fact that he prefers a buy-and-hold philosophy.
In the new calendar year, the fund performance is up?it has a return of 5.7% as against 3.4% for BSE 100. In the month of March, the fund declared 25% dividend in its retail and institutional plans. Investor need not get intimidated by its higher net asset value (NAV) of Rs 451.50. After all, it does not affect returns in any way. Rather, it?s the bigger asset size that should be a worry. Accordingly, to fund manager though, the fund size seems a trifle as compared to the entire market capitalisation of the stock market.