The Hindu Business Line : Reliance, UTI banking funds

Theme-based funds are generally considered riskier than diversified funds. Theme funds become winners when they can compensate for the risks undertaken. Infrastructure and banking were a few such themes that went well with the high-risk high-return equation, beating diversified funds by close to 20 percentage points.

The banking sector underwent a re-rating in the markets over the last year with many public and private sector banks rallying in the range of 40-100 per cent.

While Bank of Rajasthan moved sharply by 350 per cent in the past 10 months, a few such as Canara Bank, Punjab National Bank and Karur Vysya Bank did not gain from this rally.

Here’s a look at how the two top banking funds (both generated one-year return of close to 70 per cent) shuffled their portfolios the past year.

Reliance Banking Fund: The fund has an objective of investing in equity and equity related or fixed income securities of banks.

Interestingly its mandate allows it to invest 90 per cent of the assets in debt if equity market valuations appear stretched.

State Bank of India, ICICI Bank and Punjab National Bank were the top three holdings. In the past six months the fund accumulated a number of its existing holdings.

The fund’s holding in Allahabad Bank doubled in the last few months. Prominently held stocks such as HDFC Bank, Corporation Bank and Kotak Mahindra Bank, however, did not figure in the portfolio.

The fund held close to 16 per cent of the assets in cash in its latest portfolio. It selectively invested in financial services too. One such stock, JM Financial, returned manifold gains, resulting in the fund booking profits partially. The fund subscribed to Motilal Oswal and moved out after the stock listed.

UTI Banking Sector Fund: The fund’s assets under management (AUM) declined by 33 per cent over this period despite a 70 per cent return. The fund preferred to take concentrated exposure to ICICI Bank, State Bank of India and HDFC Bank, that together accounted for 55 per cent of the assets.

The fund preferred to adopt a buy-and-hold strategy, in general, with the exception of Centurion Bank of Punjab, which was pruned during the last quarter.

Stocks of financial institutions such as HDFC, IDFC, Power Finance Corporation and Shriram Transport Finance together cornered 13 per cent of the portfolio.

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