Reliance Growth fund has garnered top-notch returns for the third year in a row. After gaining 56 per cent in 2002 and 156 per cent in 2003, Reliance Growth was up another 42.57 per cent in 2004. The fund is also unique in the diversity of the stocks it holds, be it large, mid- or small-cap and growth or value stocks—you will find everything in its portfolio. With such a strong performance, investors can take a look at it, despite its high portfolio turnover.
Though a major part of Reliance Growth's portfolio consists of quality stocks, it hardly sticks to anything for long. Even if it is HLL, Reliance or Tata Motors, the fund keeps on selling and buying at every rise or fall in their share prices. Thus, on occasions it gets out of stocks before realising any gain. The other thing about this fund is that it does not hesitate to be the only mutual fund to own a new stock.
It is also more partial to small-caps than other diversified equity funds. And, in fact, this bias towards small-caps since July 2004 till date has been the biggest contributing factor for the fund's excellent performance. The fund's small-cap holdings like Uniphos Enterprises, Swaraj Mazda, Sintex Industries and EID Parry have seen their prices surge manifold since then.
The fund has also made some smart sector moves. Post-9/11, the fund took a lead by keeping a higher exposure in the then hot sectors PSU and technology. Then, it lost less in the subsequent bear phase of mid-2002 due to a low FMCG allocation. Following the rally in bank and auto stocks in 2003, Reliance Growth increased exposure in both sectors. And recently, the fund's higher allocation to technology and engineering stocks added to its superlative performance. The fund also has a habit of not being fully invested. Even in the current bull run, it has maintained an average 13 per cent cash exposure, which is higher than its peers.
The fund has a well-diversified portfolio but it is not a conventional diversified equity fund due to a heavy mid- and small-cap bias, high turnover and the high cash component. While it cannot be your core holding, it can definitely add some spice to your portfolio.
This article was originally published on February 15, 2005.
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