The Hindu Business Line : Reliance Diversified Power Fund: Hold

INVESTORS may retain their holdings in Reliance Diversified Power Sector Fund in the wake of a fairly impressive performance in its first year since launch.

This fund has diversified its exposures across stocks of companies with a presence in power generation,distribution and producers of equipment for use in the power sector. It has a slant towards the latter and this has aided performance, as investors have fancied stocks in the engineering-sector space.

Stocks such as Siemens and Crompton Greaves, which account for about 25 per cent of the assets of the fund, have been on a relentless upward trend.

Stock selection has ensured a healthy rise in the Net Asset Value (NAV) and inspires confidence.

The NAV has risen by about 60 per cent over the past year. Quite a few diversified funds — especially those with a mid-cap focus — have delivered superior returns. Exposures to stocks such as Reliance Energy, NTPC and BHEL have acted as a drag on returns.

With the power sector is poised for robust growth and the engineering companies continue to log buoyant growth to their order book, stocks from these sectors are likely to outperform the market. Despite a sharp run up in prices last year and a sluggish trend over the past three months, there is still upside potential that makes a case to stay investedin the fund.

Fresh investments may be deferred till the fund accumulates a track record across different phases of a market.

Suitability: The risks associated with investing in this fund are higher than in diversified equity funds. So far, the fund has managed to generate returns that compensate for the high risk element.

Investors may opt for the Dividend Option due to superior tax efficiency with payments exempted from tax. The fund has, however, not paid any dividend so far.

Fund Facts: This fund was launched in April 2004.The minimum investment amount is Rs 5,000. The entry load is 2.25 per cent. There is no exit load. The NAV of the Growth Option as well as Dividend Option is Rs 15.6 per unit. The fund has an asset base of about Rs 315 crore.

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