Reliance Equity Opportunities: Invest :: Business Line

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Investors with a moderate risk appetite can consider buying the units of Reliance Equity Opportunities fund.

The fund’s flexibility to switch between large- and mid-cap stocks without any sector bias has helped it deliver returns higher than the category average over one-, three- and five-year time frames.

Despite investing over 50 per cent of its assets in mid- and small-cap stocks, the fund’s volatility is moderate in relation to both its benchmark as well as peers.

Historically, the fund has managed to outperform its benchmark in rallies. For instance, during March 2009-November 2010, the fund’s NAV trebled even as the benchmark jumped 2.2 times.

Lower allocation to themes such as metals and higher exposure to pharma, consumer goods, IT led to the outperformance.

Asset allocation

The fund aims to strike a balance between value and growth investing. Its agility to increase exposure to promising themes at any given point has helped performance.

In the past, the fund has managed to quickly move into defensive themes, sensing weakness in the markets. For instance, after the fall in January 2008, the fund took refuge in defensive themes such as pharma.

The fund’s allocation to defensive pharma stocks increased from 7 per cent at the end December 2007 to almost 20 per cent by end of December 2008, helping it contain downsides.

Similarly, during the downturn, the fund reduced exposure to high beta sectors. For instance, it lowered allocation to engineering stocks from 18 per cent at the end of December 2007 to 3 per cent by end of December 2009.

But the fund’s investment strategy did not pay off at all times.

For instance, between April 2012 and now, its strategy to have a lower-than-benchmark allocation to financials did not help performance.

Similarly, higher exposure to stocks such as Ranbaxy Labs, Gujarat State Petronet and Info Edge India also dragged performance.

Performance

The fund returned gains lower than its benchmark on a one-year basis, though it managed to beat the benchmark on a three-, and five-year basis.

On a one-year basis, the fund gained 8.1 per cent, lower than the 9.9 per cent for BSE100. The level of outperformance has been to the tune of 5-10 percentage points generally.

Over the last five-years, the fund returned a robust 15.6 per cent, placing it in the top quartile of diversified equity schemes.

The fund held 61 stocks in its portfolio at the end of May 2013. The weighted average market cap of the portfolio stood at over Rs 36,700 crore.