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Aarati Krishnan

RELIANCE Growth Fund is a mid-cap focussed fund that can provide a kicker to your returns; but it comes with a fairly high risk profile.

The fund has consistently made the best of bull markets, with an aggressive investment strategy that milks the potential of momentum stocks.

Investors with a penchant for risk can consider adding the fund to their portfolio, as it has consistently demonstrated the ability to deliver market- and competition-beating returns, especially in buoyant market conditions. But its investment style and mid-cap focus could make for volatile returns.

Therefore, it may be advisable to limit it to a small portion of your portfolio. It should not be the only equity fund you invest in and may be unsuitable for first-time investors in equity funds.

Mid-cap stocks with a market capitalisation ranging from Rs 1,000 to Rs 5,000 crore make up the bulk of the Reliance Growth Fund's portfolio. The fund adheres roughly to a 70:30 mix between mid-cap and large-cap stocks. Its stock choices are adventurous and unconventional.

The fund seems to follow an investment approach that focuses on individual stocks, rather than on sectoral allocations. At times, this leads to concentrated exposures to select sectors. In recent months, for instance, the portfolio has been overweight in capital goods stocks, the sector accounting for 21 per cent of assets by April-end.

The fund's performance record is impressive. Over a five-year period, it has delivered a substantial out-performance of the CNX Midcap 200 index. This is an impressive record because the CNX Midcap 200 has been a much more difficult index to beat than Sensex or Nifty.

Reliance Growth Fund has managed a 27 per cent compound annual return on its NAV since January 2000, compared to the Midcap 200's returns of 20 per cent.

On a year-to-year basis, the fund's performance has been impressive in bullish phases, but not very consistent. Reliance Growth Fund figured among the top performing equity funds in 2002, 2003 and 2004 — years when the market was in a buoyant or a bullish phase.

In the bear markets of 2000 and 2001, the fund shed considerable value and lagged a number of its peers.

The track record makes the fund unsuitable for a conservative investor interested in containing downside risk.

But the fund's ability to beat the CNX Midcap 200 index in four of the past five years, is a point in its favour. Reliance Growth has also managed risk-adjusted returns that are on par with that of other mid-cap funds.

Fund facts: Reliance Growth Fund invests predominantly in mid-cap stocks.

Launched in October 1995, it is managed by Mr Sunil Singhania.

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