Reliance Vision Fund was an average performer in the early part of its nine-year existence, but it has staged an impressive turnaround in the past few years. Smart stock-picking and a flexible approach are the secrets of its success.
The fund has never shied away from shuffling its portfolio between large-caps and mid-caps to boost performance. This strategy has worked especially well in the last two years. In 2002, it topped the category with a mind-boggling 72 per cent return against the category average returns of just 20 per cent. And for all the critics who thought it was a one-year wonder, it repeated a similar performance in 2003, gaining 155 per cent compared to the category average returns of 112 per cent. Earlier in its existance, after clocking losses in the first half of 2001, Reliance Vision's fortunes reversed altogether after September 11. A substantial position in PSU and tech stocks did the job. It ended 2001 down 16.28 per cent, with most of the gains coming in the fourth quarter, compared to 18.94 per cent for the category.
In 2002, its mid-cap bias helped it benefit hugely from the mid-cap rally that year. Stocks like Bharat Forge and Bharat Electronics helped it deliver ballistic returns in 2002. Even during the bearish phase of 2002, the fund put up a brave front, with 21 per cent returns while the category was down 13 per cent. It ended the year at the first place among 60 funds.
Year 2003 also proved to be an excellent year, thanks to a higher exposure in banks and healthcare stocks. SBI, Canara Bank and Divi's Labs-its top holdings-made substantial gains during this period. A significant exposure in Reliance Industries also paid off.
But 2004 has not been good so far. It has lost 16.7 per cent so far in 2004 as on July 9, 2004 against the category declining 12.5 per cent. And the reason is not difficult to fathom. Mid-caps have not done well in 2004, and Reliance Vision's mid-cap bias affected its performance. Though it has increased its large-cap weightage from 43.27 per cent in January to 46 per cent, this hasn't helped much.
Since mid-caps are volatile, this fund will provide returns, but it could fall more in bear markets as has happened in 2004. Nevertheless, Reliance Vision is a good choice for investors who can handle the volatility for additional returns.