Another Reliance Mutual Fund scheme has decided to refuse big-ticket investments. Reliance Growth, a mid-cap fund that managed Rs 2,639.68 crore at March end, will not be accepting investments of Rs 5 lakh or above with effect from May 3, 2006. This is the second time the fund has decided to shut its doors, though this time it's only for big investments. In August last year, the fund had put a moratorium on fresh investments. However, it lifted the restriction later on. A few days back, Reliance Equity fund took a similar decision.
This is a positive news for Reliance Growth unit holders. Earlier this year, another mid-cap fund Franklin India Prima had suspended fresh sale of units.
Huge asset base of a mid-cap fund can be detrimental to its performance. Since such funds primarily invests in relatively illiquid mid- and small-cap stocks, large inflows could prove to be a hindrance. The fund manager may encounter problems while purchasing additional thinly-traded mid- or small-cap stocks without driving up the share price and making them more expensive. It's a welcome step, though a complete suspension would have been ideal.
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