Investors with a moderate risk appetite could consider parking some of their surplus in Reliance Regular Savings Fund – Balanced plan. The fund is a hybrid-equity oriented fund, with at least 65 per cent in equity, which can help contain downside in overheated markets.

Given its large-cap bias, the fund is also well-placed to tide over sudden volatility in the market. Some of its peers such as HDFC Prudence Fund, Principal Balanced Fund and UTI Balanced Fund have a higher exposure to mid- and small-cap stocks. While this can help them outperform in market rallies, the aggressive investment strategy can hurt in market downturns.

Reliance Regular Savings Fund, which also had a higher exposure to mid-caps until 2012, had found favour with investors, delivering category-beating returns between 2007 and 2012. But the fund shifted its focus towards large-caps thereafter.

This led to the fund underperforming its peers during the mid-cap rally between 2013 and 2016. However, the fund has made a comeback in 2017 and ranks among the top three, thanks to its higher allocation to banking stocks. It has delivered 17 per cent year-to-date, beating category returns of 13 per cent.

Favoured sector picks

Focusing on capital preservation and risk mitigation, the fund follows a large-cap oriented strategy. On an average, it has held 69 per cent in equities over the last five years. Currently it holds 66 per cent in equities of which 89 per cent is in large-caps and 11 per cent in mid-cap stocks.

The fund appears to bet on economic revival and the consumption theme. Its top sectors include banking and finance (37 per cent), auto (16 per cent), cement (10 per cent), metals (8 per cent) and oil & gas (5 per cent). HDFC Bank (8.5 per cent), Grasim Industries (5.1 per cent) and Infosys (3.5 per cent) are the top three in its equity portfolio.

While the higher exposure to banking stocks has paid off, it has also pegged up the fund’s risk. The risk, as measured by the standard deviation (based on last three years’ data) for the scheme, stood at 12 per cent, higher than the category (11.3 per cent). On the debt side, the fund follows an accrual-focussed moderate duration investment strategy. Given uncertainty over RBI’s rate action and inflation trend, the cautious approach mitigates the interest rate risk.

However, in recent times, the fund has upped its allocation to AA and below rated papers (11 per cent of debt portfolio as of May 2017). The fund has gradually reduced exposure to government securities (currently 2 per cent of debt). The average maturity of the debt portfolio is at four years while the yield to maturity (YTM) stands at 7.9 per cent.

Low on risk

Given its large-cap focus, the fund is suitable for low to medium risk profile investors who want an effective cushion during market downturns. One should not expect spectacular returns from this fund during market rallies. Investors with a five-year time frame willing to bet on the recovery story and consumption theme could invest in this fund.

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