Reliance Equity Opportunities: Invest

Investors can buy the units of multi-cap fund Reliance Equity Opportunities, in the light of its robust track record.

Over one-, three- and five-year timeframes, the fund outperformed its benchmark, BSE 100, by convincing margins in the range of 7-15 percentage points.

In the last five years, Reliance Equity Opportunities has delivered compounded annual returns of 10.5 per cent, placing it among the top quartile of funds in its category. This performance places it ahead of funds such as DSPBR Opportunities HDFC Growth and DSPBR Equity.

The fund takes a multi-cap approach to investments, though there is a significant tilt towards mid-cap stocks (less than Rs 7,500 crore market capitalisation).

The enhanced risk that such a portfolio entails is made up by investments in stable large-caps and adequate cash positions.

Barring an indifferent year in 2007, the fund has had a strong run over the past four years, by taking the right sector and stock bets.

Reliance Equity Opportunities may be suitable for investors with a medium risk appetite as there needs to be some ability to stomach volatility. Taking the SIP route would also be an appropriate mode of investment.

Portfolio and strategy

Reliance Equity opportunities invests 45-50 per cent of its portfolio in mid-cap stocks. It also maintains a cash position of 5-10 per cent, to partly temper risks.

Three sectors have consistently figured among the top sectors held by the fund over the past few years, in varying proportions. These are pharma, software and banks, each of which accounts for 12-15 per cent of the portfolio currently. None of these sectors has entered into the expensive valuation zone currently, such as the FMCG or consumer durables space, where the fund has very limited exposure.

Interestingly, retail and media too figure prominently in the portfolio.

The fund’s portfolio appears to have a combination of momentum picks and stocks from sectors that may see regulatory changes.

So, a Trent and Shopper’s Stop figure among the top holdings of the fund possibly on expectations of FDI in multi-brand retail being allowed in the country.

Hathway Cable & Datacom may have figured among key holdings on the back of the telecom regulator’s order of digitisation of cables being completed in cities soon.

Apart from these holdings, the portfolio is shielded by investments in large-caps and stable picks from the Sensex or Nifty bracket.

The portfolio is kept compact despite the large fund size with 35 stocks held at any given time. Churning is moderate with 10 stocks being exited and a similar number being bought over the past one year.

The fund’s strategy is geared to deliver market beating returns over the long term of about five years.

The NAV per unit of the growth option is Rs 35.35.

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