Portfolio Moves. Small and nippy fund gets cracking

With a one-year return of 41 per cent, the Reliance Small Cap fund comes up on top of the charts of mid-and-small cap funds. The benchmark, the BSE Small-cap Index, gained just 23 per cent in the past year. The category’s average was 25 per cent.

The thumping returns came by way of a handful of astute stock picks doing very well and a quick move to sectors that surged.

For instance, the fund was quick to add to tyre stock Ceat in mid-2013. Between then and now, the stock’s price almost tripled, and the fund steadily raised holding from less than 2 per cent in June last year to 6 per cent now. Ceat is now the top stock holding.

Similarly, buying into the TVS Motor stock late last year paid off handsomely, with the stock price nearly doubling since.

This stock pushed its way into the top ten holdings in Reliance Small Cap’s portfolio. HSIL, maker of the Hindware range of sanitary ware, is likewise up 30 per cent in the past month. The fund bought into the stock sometime in March this year.

Besides tyres and auto companies, sectors the fund loaded up on in the past year include petrochemicals and plastics.

The fund has heavy holdings currently in chemicals, capital goods, pharmaceuticals, cement and software.

But perhaps owing to the rapid rise in stock prices, the fund has pared equity holding to less than 90 per cent in the past couple of months, moving about 13 per cent of the portfolio into short-term debt instruments. The fund was invested in cash in late 2011, when markets were sliding.

Equity holdings have otherwise remained above 90 per cent. But over the longer time-frame of three years, Reliance Small Cap is a mid-quartile ranker with annual returns of 13 per cent.

For one thing, the fund had been launched only in late 2010. Top performers such as Mirae Emerging Bluechip, SBI Magnum Global or Religare Mid-and-Small cap fund all managed to contain losses in the 2011 slide far better than Reliance Small Cap.

The fund maintains a vast portfolio of over 40 stocks spread across several sectors. This, to some extent, diffuses the risk inherent in the small-cap picks the fund favours.

The weighted average market cap for the fund’s March portfolio is ₹4,569 crore.

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