The Hindu Business Line : Reliance Regular Savings Equity: Hold

Reliance Regular Savings Fund Equity Option is suitable for investors with a high-risk appetite. With a return of 56 per cent, the fund is among the top 25 diversified funds in the one-year performance chart. An aggressive management style and short-term opportunistic exposure to some stocks places this fund in the high risk-high return category. While the returns have so far been commensurate with the risks undertaken, investors can avoid further exposure until the fund establishes at least a three-year record.

Reliance RSF Equity was launched in June 2005 along with two other options — debt and hybrid — under the same banner. The fund seeks to actively invest in equity with a minimum exposure of at least 80 per cent. It has had a rather slow start, with exposure to equities at just 16 per cent in January 2006. Active investing, however, began from March 2006 and the fund has since maintained equity equity above the 80 per cent limit.

Performance: RSF Equity's return of 33 per cent since launch lags its benchmark BSE-100, as it remained low on equity in 2005. The fund has, however, beaten its benchmark on seven out of 12 occasions on a rolling return basis over the past year.

In terms of management style, RSF Equity can be compared to Reliance Vision, another aggressively managed scheme from the same fund house. The distinguishing factor is that, while Reliance Vision is more large-cap focussed, RSF Equity appears to adopt a multi-cap strategy. The latter's success may well depend on its ability to make successful trading calls consistently, like its peer, Reliance Vision.

Interestingly, the fund managed to contain declines better than a number of its peers and its benchmark in the market correction in May. While it had invested in equities to the extent of 92 per cent in March 2006, it quickly reduced the same to 65 per cent at the end of April 2006 and moved to cash. This may have helped it cut losses, though it swiftly moved to equities yet again in June with an exposure of close to 90 per cent. The compact asset size (Rs 115 crore) helps in making deft moves.

Over the past six months 30-35 per cent of the assets were invested in stocks with a market capitalisation of less than Rs 2,000 crore. Some of the mid- and small-cap stocks, such as Binani Industries and Divis Laboratories, have rallied sharply over the fund's holding period.

Suitability: Reliance RSF Equity's portfolio indicates an active shuffling strategy. The fund has taken short-term views on a number of stocks in the large- and mid-cap segments, such as United Phosphorus, McDowell, and ONGC. This kind of aggressive style may not be the best recipe for conservative investors. Further, holdings in stocks such as Govind Rubber and SPL Industries, which have a market cap of less than Rs 100 crore, also reflect the fund's willingness to take risks.

Investors holding the fund need to ensure that it is does not form part of their core portfolio. Reliance RSF Equity is managed by Mr Prashant Pimple and Mr Ashwani Kumar.

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