Making smart moves to stay ahead of others

FUND ANALYSIS: Reliance Growth

Launched in October 1995, the fund is known for its great returns. If we take a look at the past five calendar years, it has consistently beaten the category average by a fairly impressive margin.

While it was ranked 25 (of 58) in 2001, it maintained a top quartile position during the next four calendar years and was number six (of 101) in 2005. In 2006, the fund delivered 41 per cent returns, more than the category's average of 34.69 per cent.

This year also, the fund is ahead of an average peer so far. While the volatility during June and July had been tough to negotiate, the fund made up for the losses in August 2006.

With around Rs 3,000 crore being managed, this one is the largest mid-cap fund and like Franklin India Prima, that is cause for concern for this fund as well. The ability to take aggressive positions in small stocks, get in and out of them quickly gets diluted with increasing size.

It will be interesting to see how the fund manager negotiates these issues in the near future. The fund manager has an unconventional approach to investing. In some stocks, it is a buy-and-hold strategy and in others it is a quick entry and exit. The allocation to mid and small caps is around 83 per cent.

The fund is known for making smart sector moves. After 9/11, the fund took a lead by keeping a higher exposure in the then hot sectors of PSU and technology.

Then, it lost less in the subsequent bear phase of mid-2002 owing to a low FMCG allocation. Following the rally in bank and auto stocks in 2003, Reliance Growth increased exposure in both sectors.

JSW Steel, Reliance Industries, Bharat Earth Movers, Jindal Saw and JP Associates are this five-star fund's top holdings.