The current market condition offers a good investment universe for ‘go anywhere' multi-cap funds such as Reliance Equity Opportunities.
Investors with some risk appetite can consider phased exposure in the fund through systematic investment plans.
Investors who opted for three-year SIPs during the peak of 2008 and continued to stay invested in the fund will have earned an absolute return of 33 per cent against minus 1 per cent clocked by lump sum investors. The SIP return vis-à-vis the lumpsum performance is an indicator that the fund is subject to high volatility.
Despite a decline of 18 per cent in its NAV over a one-year period, the fund's asset under management grew by 12 per cent, implying that the fund has witnessed higher inflows. Markets such as the present one may provide ample opportunities for fund manager to deploy such funds in stocks at attractive valuations.
Suitability
Although Reliance Equity Opportunities is benchmarked against the BSE 100, it takes substantial exposure to mid and small-cap stocks.
The fund is suitable for investors who can assume risks that come with the above market-cap segment. An active profit-booking strategy will help cash in on extraordinary rallies.
Performance
The fund's high SIP returns indicate that its NAV is subject to massive swings. For instance, between January 2008 and March 2009, the fund's NAV swung between Rs 31 and Rs 11.8.
But that also means higher opportunities to average rupee costs and make superior returns during a market pullback. The fund proved its mettle in the 2008-09 pullback and amply rewarded it investors.
The fund, over three- and five-year periods, clocked compounded annualised returns of 30 per cent and 7.6 per cent, respectively, against 16.2 per cent and 3.1 per cent returns by its benchmark BSE 100.
Its performance over a three-year period placed it at the top of multi-cap peers. Higher exposure to interest-rate sensitive sectors such as banks and auto, however, resulted in a sharp correction in the last six months.
The fund's top ten stocks accounted for 40 per cent of its assets. Its preferred sectors such as software, pharma, banks, auto and auto ancillaries accounted for 53 per cent of the portfolio.
The fund appeared to be contrarian in its outlook on FMCG. It has held less than a per cent of its assets in the FMCG sector for more than a year now.