The Hindu Business Line : Reliance Growth: Managing mid-cap churn

This week, we examine the churns made by a fund, which invests predominantly in mid-caps — a segment that bore the brunt of the decline in May. We take a look at how the portfolio of Reliance Growth was managed over April-June 2006.

The fund held 43 stocks in its portfolio with the top ten holdings accounting for 32 per cent of the assets. The top five sectors cornered 43 per cent of the portfolio. The fund shed some capital goods flab but remained the segment with highest exposure. The stock of Reliance Industries replaced Bharat Earth Movers to obtain maximum weight in the portfolio. The fund also pared exposure to Crompton Greaves, while adding on Greaves Cotton.

The fund cut down on industrial products and consumer non-durables. Jain Irrigation was the only new addition to the industrial products sector. Kirloskar Brothers and KSB Pumps were sold. Dhampur Sugar Mills was moved out from the consumer non-durables sector. The fund also pared exposure to stocks such as EID Parry, Hindustan Lever and Radico Khaitan as consumer goods have so far not proved to be particularly good defensive bets in the current volatile market. In the banking space, the frontline stock ICICI Bank took the exit route. Under-performance by a number of banking stocks over the past year may have prompted the fund to trim holdings in Bank of Baroda and Dena Bank

It raised the allocation to sectors such as software, ferrous metals, pharma, auto and construction.

The software sector, which declined with the market during the recent correction, was partially re-rated on the back of good results declared by the frontline companies led by Infosys. The fund, therefore, appeared to have renewed interest in the space and added Educomp Solutions and Northgate Technologies. Exposure to HCL Technologies and Aztec Software and Technology services were however pared. It also lost interest in the stock of Solectron Centum Electronics and sold it.

Ferrous metals appeared to have attracted the fund's attention. Maharashtra Seamless found favour as the holding in the stock was enhanced by 82 per cent over the quarter. The shares of Jindal Saw and JSW Steel and Power were accumulated. The fund, however, booked profit in Hindustan Zinc.

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