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Regaining Focus

By shuffling its portfolio between large-caps and mid-caps, this fund has earned handsome returns for its investors--it boasts one of the best five-year trailing return of 40.21 per cent as on September 12, 2005. This fund is recovering from a mediocre performance in 2004

This strategy has worked quite well for the fund since 2001, except in recent times. After posting losses in the first half of 2001, Reliance Vision's fortunes changed completely after September 11. A substantial position in PSU and tech stocks resulted in the fund ending 2001 down 16.28 per cent, compared to an 18.94 per cent decline for its average peer. In 2002, the fund earned a massive 75 per cent against the category average return of just 20 per cent. It had loaded up on mid-caps, and the mid-cap rally that year resulted in the fund topping all diversified equity funds. And for the critics who thought it was a one-off performance, it repeated a similar performance in 2003, gaining 155 per cent compared to the category average returns of 112 per cent. In 2003, a higher exposure to banks and healthcare stocks resulted in superlative performance.

But 2004 was not a good year for Reliance Vision. The fund underperformed the category with returns of just 19.81 per cent against the category average of 25.92 per cent. A poor performance in the first quarter cost the fund dear. The fund manager had allocated an average 51 per cent to mid-cap stocks in hopes that those stocks would continue their 2003 show. But when equity markets slumped, the fund suffered. For the first quarter, the fund slipped nearly 8 per cent against the category average fall of 4.11 per cent. The fund did not manage to recover from that loss as it finished just around the category average for the next three quarters.

In 2005 the fund is back in shape with year to date returns of 30.49 per cent as on September 9, 2005, marginally below the category average of 30.62 per cent. This year, a huge allocation to auto and basic engineering stocks has clicked. Stocks like Automotive Axles, Bharat Forge, Ceat and Siemens have helped the fund deliver category-beating returns. Select energy (ONGC) and FMCG (Colgate and ITC) stocks have rewarded the fund well. Investments in Reliance Industries and Television Eighteen too have also brought in gains.