Reliance Large Cap: Holding steady in volatile times

While keeping risks low, the fund scores on returns by taking active sector and stock calls

The ongoing turmoil in the market has taken a toll on many funds. Among the better performers amidst the volatility is Reliance Large Cap (earlier Reliance Top 200). The fund managed to keep its head above water over the past year when many of its large-cap peers slipped badly.

Also, its long-term track record is impressive. With annualised returns of about 17 per cent over five and 10 years, it is a top-quartile performer in the category and has done better than its benchmark, S&P BSE 100 Total Return Index. A good large-cap-focussed fund that can withstand volatility better than funds in other riskier categories can be a good core portfolio fit for long-term investors who want to play it relatively safe. Reliance Large Cap fits the bill. Investors can consider deploying money through the SIP route to ride out market volatility better.

Low risks, healthy returns

As per the SEBI mandate, the fund invests at least 80 per cent of its portfolio in the top 100 companies by market capitalisation; the allocation to such large-cap stocks as of November 2018 was 81 per cent. The fund has the flexibility to invest the rest in stocks in other categories. Besides the large-cap focus, a diversified portfolio of nearly 50 stocks pegs down risk.

Across the portfolio, the focus on high-quality companies that are leaders in their businesses moderates the risk quotient.

While keeping risks low, the fund scores on returns by betting on growth stocks and by taking active sector and stock calls.

For instance, it is currently overweight on healthcare stocks compared with the benchmark, and is underweight on energy stocks.

The fund also does not shy away from taking seemingly contrarian calls which could pay off well when the tide turns for the better. For instance, its largest holding currently (about 9 per cent of the portfolio) is PSU banking major SBI.

A lower-than-category average expense ratio (2.19 per cent for the regular plan) also aids portfolio returns.

The scheme remains almost fully invested in equities with temporary tactical cash calls; equity allocation has been between 96 and 99 per cent over the past year and has rarely fallen below 94 per cent over the past three years. The fund is now focussing on themes that can benefit from domestic revival, moderation in interest rates and higher disposable incomes.

Besides SBI, other top holdings include L&T, Axis Bank, ICICI Bank, HDFC Bank and ITC (5-6.5 per cent of the portfolio each).

Over the past year, the fund has sharply upped its exposure to the banking sector while reducing stakes in auto and software companies. Banks account for the largest portion in the portfolio (about 28 per cent), followed by pharma (9 per cent) and finance (8 per cent). Fund manager Sailesh Raj Bhan has been managing the scheme since its inception in August 2007.

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