The Hindu Business Line : Reliance Vision: Hold

Investors can retain the units of Reliance Vision, a large-cap oriented fund, in view of its long-term track record in delivering steady returns. Over a five-year period the fund has managed a compounded annual return of 20.7 per cent which places it among the top quartile of diversified equity funds.

Reliance Vision has managed to better its benchmark, the BSE 100, on one- and five-year basis, but not over a three-year timeline.

Investors looking for a large-cap focus may consider switching to other such funds with better downside containment track record such as Birla Sunlife Frontline Equity, DSPBR Top 100 Equity, HDFC Top 200 and reasonable participation during market upswings.

Performance and strategy

As the fund has tended to have some mid-cap exposures in its portfolio, it has not managed to weather short-term corrections in the markets well, as in 2004 and 2006. In the 2006, correction Reliance Vision underperformed its benchmark as well.

But in a prolonged bear phase, for instance, the whole of 2008 and early part of 2009, the fund has contained downside better than its benchmark. The fund’s ability to contain downside better over the past year can be traced to a strategy of pegging up cash positions in the portfolio and taking more defensive sector exposures.

During the market rally in 2007, Reliance vision lagged the BSE 100 in returns, but has done better than several peers. But in the recent rally since March, funds such as Birla Sunlife Equity and HDFC Top 200 have done 3-9 percentage points better than Reliance Vision in capitalising on the rally. A higher cash position may have played a part in the fund not being able to benefit from the rally.

Portfolio

Reliance Vision’s April 2009 portfolio shows over 30 per cent of the assets are invested in cash and equivalents. This has gone up from 11 per cent levels a year ago.

Defensive sectors such as software and pharmaceuticals are among the top sectors held by the fund along with banks. This marks a change from last year when, in addition to banks, petroleum, automobiles were among the top sectors held.

The top 10 stocks that accounted for nearly 52 per cent of the fund’s portfolio a year ago, now account for only 43 per cent. Together these facts suggest a cautious approach towards the markets.

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