The Hindu Business Line : Reliance Equity Opportunities Fund: Hold

Unitholders can stay invested in Reliance Equity Opportunities Fund. The fund's NAV has grown 46 per cent in the past year and it has outpaced its benchmark BSE-100 by 4 percentage points.

The performance so far is on par with the diversified funds category, in which the fund is in the top quartile. It to marginally outperformed Reliance Vision Fund, which has similar style of investing, with a consistent track record over a five-year period.

The fund has the flexibility to invest in stocks from across the market cap range. With the stock market at relatively high levels and mid-cap stocks trading at valuation discounts to large-caps, such flexibility to invest could help performance. Reliance Equity Opportunities is suitable for investors who prefer an exposure to mid-cap stocks in their portfolio to improve the return potential. The fund generated a return of 42 per cent on investments through the SIP route.

In the May-June 2006 correction, the fund shed 51 per cent (7 percentage points more than its benchmark); this is probably on account of holding close to 25 per cent of its assets in small-cap stocks (market cap less than Rs 2,500 crore). However, it subsequently recovered from the lows of June 2006 and appreciated by about 62 per cent by end January 2007, compared to a 57 per cent gain on the BSE-100.

Portfolio Overview: Reliance Equity Opportunities has a well-diversified portfolio, the top ten stocks accounting for 38 per cent of the assets. The portfolio features 22 sectors, with the top three cornering 35 per cent of the assets. IT, capital goods and pharma have been among top sector choices over the past year. It seems the fund is not too aggressive in churning its portfolio.

The fund appears to cap exposure to any single stock at 5 per cent. It adopts a buy- and-hold strategy and books profit at intervals.

Some of its stocks, such as Areva T&D India, Aurobindo Pharma, Aventis and Nirma, have been in the portfolio close to a year.

Fund facts: Reliance Equity Opportunities Fund was launched in March 2005 and is managed by Mr Sunil Singhania. The assets under management were Rs 2,267 crore as of December 2006.

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