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Suresh Krishnamurthy

INVESTMENTS in Reliance Growth can be considered as its performance since 2001 has been impressive. The substantial improvement has, however, coincided with a bull run in stock prices.

The quality of outperformance in a sustained down market is largely untested, though the scheme's performance in the volatile market of 2004 is encouraging. Investments can, therefore, be made in phases.

Performance: The absolute returns generated by the scheme in the past four years place the scheme in the top quartile.

In addition, in each of the four years since 2001, Reliance Growth consistently outperformed the BSE-200.

In terms of risk-adjusted performance, too, the scheme is among the toppers. Since 2001, the scheme has outperformed in 30 of the past 46 months. Usually, when BSE 200 declines in value, the scheme loses almost as much, barely outperforming.

When the BSE-200 gains, however, the scheme outperforms by a sizeable margin. On an average, the scheme outperformed BSE-200 by about 1.8 percentage points each month since 2001.

Portfolio: Reliance Growth is a larger scheme with assets under management of nearly Rs 700 crore at the end of October 2004. The cash position in the fund was about 15 per cent at end-October. This can be considered high and may pull down returns if the cash position stays this high in a rising market.

Reliance Growth sports a considerably diversified profile. No stock in the portfolio forms more than 5 per cent of net assets. The top ten stocks account for nearly one-third of the net assets.

This is among the lowest in the fund industry. In terms of sectors, too, exposure has been contained below 10 per cent.

Reliance Growth also has invested nearly one-third of its assets in stocks that are not part of BSE `A' group. Prominent non-A group stocks in the portfolio are Sundram Fasteners, Radico Khaitan, Swaraj Mazda, Sintex Industries and Bata India.

The presence of a large proportion of non-A group stocks in the portfolio enhances the risk involved in the fund.

On the other hand, such investments have propped up the scheme's returns over the past 46 months.

If the stock selection continues to exhibit superior tendencies, the presence of non-`A' group stocks would enhance returns. Investments in the scheme are recommended on that premise.

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