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Bold Contrarian

Reliance Regular Savings Equity often takes a contrarian stand but has the ability to protect the downside as well

Launched in the middle of the bull run, this fund has delivered impressively. It was streets ahead of the competition with a return of 56 per cent and 93 per cent in 2006 and 2007, respectively. And in the market downturn, from January 8, 2008 to July 15, 2008, the fund did not fall too hard and displayed an average performance with a 41 per cent fall (its peers came up with -42 per cent).

What's unique about this fund is the manager's tendency to go against the herd. When the category average sector allocation to basic-engineering was around 12 per cent in the first half of 2006, the fund had no investment in this sector. Last year, when funds were betting on the energy sector, the fund manager took an exposure to this sector only from July onwards and maintained an average exposure of just 4 per cent for the rest of the year.

Of course, this contrarian stand is not always a positive factor. For instance, the BSE Oil & Gas and Power indices delivered 115 per cent and 122 per cent in 2007, respectively. The fund missed out on this rally but still delivered an impressive performance on the back on astute stock picking. And in 2006, the fund manager shied away from financial services and exited the sector in May 2006. In the latter half of the year, the sector soared with the BSE Bankex delivering 39 per cent in 2006. Technology has always been dominant in the fund's portfolio and has accounted for 12 per cent since launch and currently stands at 10 per cent.

Although the portfolio of 37 stocks is diversified across sectors, the fund manager doesn't hesitate in taking aggressive bets for the short term. The portfolio is frequently churned and a number of stocks are held for less than six months. The short-term bets in companies like Jindal Steel & Power, Ashok Leyland, Cummins India and Eicher Motors proved fruitful.

What is worth noting is the consistent increase in allocation to cash. From 6.19 per cent February 2008, it is moved to 26.56 per cent in June. The fund manager obviously picked up on some good buys after the market fall and it has now been lowered to 15.23 per cent (July).

Its aggressive investment style and high mid-cap allocation make it a bold offering. But its ability to outperform its peers and protect the downside well makes the nervy investors feel right at home too.