The Hindu Business Line : Petro funds ride high on Reliance stock

THE market's euphoria over the Reliance Industries stock has come as a shot in the arm for mutual funds focused on the petrochemicals sector. Reliance, which recently touched the Rs 650-mark, has helped catapult petro funds' net asset values (NAVs) in the last few days.

UTI Petro Fund and JM Basic Fund, in which Reliance accounts for about 10 per cent each, have given an average return of 0.43 per cent over the last seven days (as on June 20) — the third highest return (after technology and index funds) among equity funds during this period.

JM Basic, said Mr Krishnamurthy Vijayan, CEO of JM MF, is now set to absorb the full effect of the Reliance factor, triggered as it is by the accord reached between the two brothers, Mr Mukesh Ambani and Mr Anil Ambani.

The reference is clearly to the recent movements recorded by the Reliance scrip, which (along with the Reliance Capital counter) ended up at the centre of the market's attraction on Tuesday. The stock made significant intra-day advances, opening at Rs 630.50 and closing at Rs 648 before it reached the day's low at Rs 621.

Petro funds were not really in the reckoning over the past year — not when viewed against the likes of fast moving consumer goods funds (which delivered 65.95 per cent over one year as on May 20) or technology funds (56.35 per cent). In comparison, petro funds provided only 30.97 per cent to their investors.

The funds in question are invested heavily in oil and gas sector counters such as HPCL, Indian Oil Corporation, ONGC and GAIL (India) Ltd. Reliance contributes 9.96 per cent and 9.84 per cent respectively of the portfolios of JM Basic and UTI Petro (as on May 31).

JM Basic, Mr Vijayan pointed out, has recently proposed to diversify further by also allocating to sectors such as power generation and electrical equipment.

"We have sought unit holders' approval for changing the scheme's investment objective," he added.

The fund has also replaced its benchmark index, S&P CNX Petrochemical Index, with BSE Energy Index.

Some of the constituents of the newly-adopted index (as on April 1) are L&T, Crompton Greaves, Asian Paints, NTPC, Gujarat Alkalies and Finolex Industries.

Exposure to any company will be limited to 10 per cent of the NAV at the time of investment, JM MF said.

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