The Hindu Business Line : Reliance Diversified Power Sector Fund: Hold

INVESTORS may retain their exposures in Reliance Diversified Power Sector Fund, as it has performed consistently in the 20-month period since launch. As a major part of the period documented a bull rally, the fund is yet to build a track record over different phases of the market. Fresh investments can be postponed till the fund accumulates a longer track record.

Reliance Diversified Power has exposures across stocks in the business of power equipment manufacturing, power generation, transmission and distribution. The dream run enjoyed by stocks such as Siemens, Crompton Greaves and ABB, which form a prominent part of the fund's portfolio, has ensured that the fund outpaced BSE Capital Goods index over the last year.

The macro environment in the domestic power sector appears positive. With positive tariff policies and opening up of the private sector for transmission and distribution, the sector is likely to see heightened activity over the next couple of years. The Government's initiative to reduce transmission losses and ramp up capacity may translate into accretion in the order-books for companies such as Siemens and BHEL.

With stocks such as Jaiprakash Associates and Jindal Steel and Power the fund enjoys the benefits of infrastructure boom as well. The portfolio also holds mid cap-stocks such as KEC International and CESC. Although these stocks hold potential, the returns are likely to be more moderate than the manifold gains of the past couple of years. Any delay in implementation or changes in the power policy may mar performance.

The one-year return of Reliance Diversified Power has been 87 per cent. The fund has outperformed its comparable index — India Power Index — since launch. Funds such as SBI Tax Gain and SBI Sector Emerging Businesses, which have a tilt towards power and infrastructure stocks, have delivered superior returns over a one-year period. Reliance Energy has dragged the performance of the fund for more than a year now.

Recent additions such as Cummins and Shri Ramrupai Balaji Steels have also shown lacklustre performance.

The fund may suit investors who wish to hold power-sector stocks, as part of their portfolio. Being a sector fund, the risks associated are higher than a diversified fund and hence require active tracking and timely profit-booking.

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