Proving its worth

FUND PICK: Reliance Banking Fund

Reliance Banking fund has outpaced BSE Bankex by good margins on several occasions.

When Reliance Mutual Fund came out with the first banking fund of India in mid 2003, nobody knew if there was space for such a product.

However, in a little over two years, Reliance Banking fund has proved its worth by more than tripling investors' money. Of course, a strong rally in banking stocks has helped. The fund has an impressive annualised return of 56.36 per cent since launch.

Reliance Banking started at a good time, when the equity markets were just starting to gain serious strength. Banking stocks too were about to see one of their best times. Reliance Mutual Fund seized the opportunity and launched this fund.

Since then the BSE Bankex has had little difficulty in moving ahead. Reliance Banking has matched this momentum, outpacing the index by good margins on several occasions. The fund generated 53.78 per cent return in the first year of its launch.

The next year proved to be a landmark for the fund. It capitalised on the extended equity markets rally in 2004 and raced to return a whopping 58 per cent, substantially better than the 33 per cent gain of the BSE Bankex. Interestingly, this was the third best equity fund of last year behind Magnum Contra and Magnum Global.

In 2005 so far, Reliance Banking has done reasonably well. Though it's not as hot as some of the diversified equity funds, it's 26.48 per cent gain is better than 24.41 per cent rise in the BSE Bankex.

Starting with a large-cap portfolio, the fund manager has shuffled assets between large, mid- and small-cap stocks frequently. The fund earned huge returns in 2004 on back of a mid-cap tilted portfolio.

This year, though, the focus has shifted back to larger companies. The fund had started off with a concentrated portfolio. Till late last year, six to eight stocks used to form the portfolio. This has changed now and with assets spread across 14 to 17 stocks, the fund looks well-diversified.

As expected, SBI has always dominated the portfolio. Except for rare occasions, the stock has remained the top holding of the fund since launch - at times occupying nearly a quarter of the portfolio. 
 

Top holdings
As on September 30, 2005	Value (Cr)	Net Assets (%)
State Bank Of India	11.73	14.93
Punjab National Bank	6.76	8.60
IDBI	6.16	7.84
Bank Of Baroda	4.98	6.34
Karur Vysya Bank	4.18	5.33
Bank Of India	3.69	4.69
IL&FS Investsmart	3.46	4.41
Corporation Bank	3.38	4.31
I N G Vysya Bank	2.77	3.53
Allahabad Bank	2.76	3.51
Bank of Maharashtra	2.38	3.03
South Indian Bank	2.21	2.82
Federal Bank	1.88	2.39
Jammu & Kashmir Bank	1.63	2.08
Chola Investment & Finance Co.	1.26	1.61
Others	0.02	0.02

Like all sectoral offerings, this fund may also turn quite volatile with the ups and downs in the banking sector. Investors may add this fund to their portfolio for an added exposure to banking stocks.

- Value Research

Returns in % as on October 27, 2005

Equity fund categories continued to feel the heat as equity markets came under renewed selling pressure. All equity category returns for the past month were in the negative, with banking sector funds posting the maximum losses. 
 

Equity funds Average equity category returns (%)
	1 month	1 year
FMCG	-8.71	77.75
Banking	-12.44	62.25
Tax planning	-8.65	56.71
Diversified	-8.10	49.11
Auto	-6.91	48.17
Technology	-5.56	37.05
Index	-8.86	35.43
Pharma	-8.23	22.81
Petroleum	-6.46	12.93

Their category average amounted to 12.44 per cent. Petroleum sector funds were the least affected during the past month, though even their returns were in the red at -6.46 per cent. 
 

Leaders Index funds
	1 month	1 year
Bank BeES	-13.09	61.54
HDFC Index - Sensex Plus	-8.68	39.56
UTI Master Index	-8.71	38.14
SENSEX Pru ICICI ETF	-8.41	37.55
Franklin India Index  - Sensex Plan	-8.36	37.49
Tata Index Fund - Nifty Plan	-8.70	37.11
Tata Index Fund - Sensex Plan	-7.52	36.67
HDFC Index Fund - Sensex Plan	-8.39	36.43
Prudential ICICI Index	-8.65	35.16
LIC MF Index - Sensex Advtg	-7.72	34.98

However, annual returns of equity funds continued to be impressive, with FMCG funds leading the way with 77.75 per cent. Index funds posted a -8.86 per cent return for the month and 35.43 per cent for the year. 
 

Laggards Index funds
	1 month	1 year
PRINCIPAL Index Fund	-8.29	29.49
ING Vysya Nifty Plus Fund	-8.06	30.10
LIC MF Index - Sensex Plan	-11.27	31.06
SBI Magnum Index Fund	-8.55	31.17
Nifty BeES	-8.65	31.18
Birla Index Fund	-8.23	31.33
HDFC Index - Nifty Plan	-8.58	31.93
S&P CNX NIFTY UTI NDRS	-8.29	32.26
Canindex	-8.35	32.38
UTI Nifty Fund	-8.46	32.71

Among broad-based index funds, HDFC Mutual Fund's index fund "� Sensex Plan posted the best return for the past 12-months at 39.56 per cent.