The Hindu Business Line : Reliance Equity Opportunities: Hold

Investors can retain their units in Reliance Equity Opportunities Fund. With a return of 86 per cent since inception and currently among the top 20 diversified funds, the performance of the scheme appears encouraging.

Since its launch a year ago, Reliance Equity Opportunities has largely witnessed a bull rally, barring the recent carnage in the market.

While the performance so far is at par with diversified peers, the fund lacks a track record. Its ability to withstand protracted bear phases and its strategy to mitigate downside risks will determine whether the fund can join the league of established schemes such as HDFC Top 200.

The fund's objective is to invest in sectors that hold potential and achieve value and growth for the investor. Despite its mandate to invest in stocks across market capitalisation segments, the fund is predominantly invested in large-caps.

Exposure to stocks with a market cap of less than Rs 2,000 crore is restricted to around 10 per cent on most occasions. The fund did not participate in the short mid-cap rally witnessed in 2005 and trailed the BSE Mid-cap index over such periods.

Stocks with a market cap of over Rs 4,000 crore constitute 70 per cent of the total assets. The fund holds a compact portfolio of around 35 stocks. Reliance Opportunities' performance has accelerated over the past few months due to the rally witnessed in large-cap stocks. The fund has returned 96 per cent in the past year and is well above the benchmark BSE-100 return of 82 per cent.

The broad market is likely to witness highly volatile phases. Given the fund's flexibility to invest across market cap ranges, making timely calls on the large-cap and mid-cap allocation is likely to improve returns.

Portfolio overview: The top ten stocks account for 38 per cent of the total assets. The fund has favoured stocks in capital goods, construction and software space. It has stayed on with Siemens, Jaiprakash Associates, BHEL, HCL Technologies and TCS despite rich gains.

The fund has also adopted a buy-and-hold strategy in stocks such as ITC, Aventis Pharma and Reliance Industries with periodic profit booking.

Fund facts: Reliance Opportunities was launched in March 2005. It manages assets valued at Rs 2,260 crore. Mr Sunil Singhania and Mr Sailesh Raj Bhan manage the fund.

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