The Hindu Business Line : Reliance Growth: Invest

HAVING scaled new highs, the market is expected to be volatile and a correction is seen as overdue. Investing in funds may be a safer option for those who want to restrict the possible downside risk. A diversified fund with a consistent five-year track record should be the top choice for those contemplating fresh investments now.

Reliance Growth is among our preferred picks as it has been a consistent performer over a five-year period. It has also been one of the top performers over the past year. Investments may, however, be considered in phases by way of a systematic investment plan, to minimise the risk of bad timing.

Over the past year, the fund has delivered a return of close to 80 per cent, beating the Sensex by a mile. The returns outpace the likes of Franklin Prima and HDFC Top 200, which also enjoy a good track record.

The fund focuses on mid-cap stocks. This typically lends it a higher risk profile than a diversified fund. It, however, appears to follow a more fluid investment strategy. Quite a few large-caps now figure prominently in its portfolio.

The fund has also focused on the more prominent mid-cap stocks in recent months. Only 20 per cent of its portfolio is invested in stocks with a market capitalisation of less than Rs 2,000 crore, against 40 per cent in June 2004. With an asset base of more than Rs 2,000 crore, this bias towards larger, more liquid stocks is to be expected.

In fact, the fund had stopped accepting fresh inflows in August with an intention to cap its asset base to Rs 1700 crore.

After the cap has been lifted, however, it has seen considerable inflows. The portfolio in January also shows a fairly large cash position. The fund, however, recently declared a dividend of 75 per cent.

Stocks in its portfolio trade at an average valuation of 15, which is at a discount to that of the Sensex. Portfolio overview: The portfolio is well diversified. Holdings in any single stock do not exceed 5 per cent, with the top ten stocks accounting for less than 30 per cent of the total assets.

The engineering sector accounts for about 15 per cent of its overall assets. The rest of its holdings is splintered across sectors.

Stocks such as EID Parry, Kirloskar Brothers, Crompton Greaves, Century Textiles, to name a few, figure prominently in its portfolio and have delivered handsome returns over the period.