The Hindu Business Line : Reliance Growth Fund: Invest

Investments in Reliance Growth Fund can be considered. Its performance over three- and five-year periods inspires confidence and it has outpaced its benchmark BSE-100 by a good margin. Reliance Growth, like Franklin Prima, encountered problems with its huge asset base and restricted fresh inflows at times when opportunities in the mid-cap space dried up.

In August 2005 it restricted its corpus to Rs 1,700 crore and imposed a three-month freeze on inflows. This was when the first major correction in the mid-cap space was witnessed. In April 2006, it reinstated a freeze on fresh investment, just before the market underwent a steep correction in May. The freeze has since been lifted and there have been heavy inflows into the fund. The fund also declares hefty dividends to keep the asset size under check.

Suitability: Reliance Growth has a bias towards mid-cap stocks, with about 45 per cent of its assets invested in stocks with a market capitalisation of Rs 2,000 crore. It carries a higher risk profile than a large-cap fund. With a blend of large-cap and mid-cap stocks, however, it has the potential to boost your return on investment if you are willing to stay for at least two to three years.

The fund is suitable for investors with a moderate risk appetite. They can optimise returns by routing investments through systematic investment plans (SIP). This minimises the risk of bad timing and helps accumulate units at different stages of the market. SIPs also give investors the opportunity to periodically analyse the fund's performance before committing more funds.

Performance: Reliance Growth Fund generated a return of 38 per cent over the past year and trailed the BSE-100 by four percentage points. This fund trailed such peers as Sundaram Select Midcap and Magnum Midcap, which delivered returns of 63 per cent and 42 per cent respectively.

The fund has, however, outperformed Franklin Prima, which has a superior track record. Reliance Growth trailed BSE-100 in eight of the last 24 months. The fund is among the few in the mid-cap category to generate a positive return over the past six months.

Portfolio profile: Reliance Growth is well diversified, with holdings spread across 26 sectors and holdings in no single stock exceeding 6 per cent.

The top three sectors — software, capital goods and ferrous metals — account for 30 per cent of the asset size.

In the large-cap space, stocks such as Reliance Industries, State Bank of India, BEML and MTNL have figured consistently in the portfolio. GSFC, Greaves Cotton and TNPL are the prominent mid cap holdings.

Fund facts: Reliance Growth was launched in October 1995 and is managed by Mr Sunil Singhania. The asset base as of August 2006 was Rs 2,158 crore.

The minimum investment is Rs 5,000 and entry load is 2.25 per cent. It offers dividend, growth and bonus options. The NAV per unit is Rs 234.8

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