Reliance Top 200 ::Business Line

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While its benchmark, the BSE 200 index, has lost 10 per cent in the last one year, Reliance Top 200 contained losses to 5.4 per cent during the period. Interestingly, the fund did not rely on higher cash holdings or debt to ride through the market volatility. Cash and other liquid investments formed only about 2-6 per cent of the total holdings in the year. What were the fund's sector and stock choices?

Banking remained the fund's top sector choice in the first half of the period. The sector has performed better than many others such as capital goods, power or realty. However, the fund progressively reduced exposures to banking in the last 12 months. From 19.5 per cent of total holdings in April 2011, exposure to the banking sector is now trimmed to 13 per cent.

The reduction may have helped. Margin pressures from rising costs of funds, lower credit growth and asset-quality concerns did batter banking stocks. The BSE Bankex, for example, lost about 10 per cent of its value in the last one year.

EXPOSURE TO IT

The fund retained exposure of 13-15 per cent to IT (software) stocks throughout the year. Software took over as the top sector since October. The fund also benefited from paring holdings in metals stocks.

The fund could have, perhaps, fared better had it heightened exposure to pharma and consumer non-durables (FMCG). Canara Robeco Large Cap +, a peer fund, has benefited from such a move.

While this fund invested 9-15 per cent of its holdings in consumer non-durables, Reliance Top 200's exposure has been capped at 2-5 per cent. Pharma, too, has come into the top three only since December.

STOCK PICKS

Four of the top five picks in April 2011 — Infosys, Reliance Industries, ICICI Bank and HDFC Bank — remain in the top five currently. But the fund has actively managed holdings in these stocks by periodically booking profits or paring holdings to contain losses.

Maruti Suzuki, which appeared among the top five in the beginning of the year, is another good example of this strategy.

The company's car sales slowed and production was affected by strikes last year. Hence, the fund reduced its holding in the stock from 7.5 per cent in April 2011 to 4 per cent by December, and then completely exited the stock. The stock price fell by 28 per cent in this period.

The fund recently re-entered the stock as the outlook has improved. . Similarly, the fund has consistently bought into Divi's Labs, which boasts of a 24 per cent return in the last year.

Recent entrants include Coal India, Container Corporation and TCS. SIAL, Sterlite and Alstom have found their way out in the last three months.