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In volatile markets, investors wanting to take calibrated bets should consider funds with a large-cap focus. Reliance Top 200 is a pure large-cap fund, investing in stocks within the S&P BSE 200 index.
Over the last three to four years, the fund has held over 80 per cent of its assets in large-cap stocks (with market capitalisation of over ₹10,000 crore). It currently has around 95 per cent of its corpus in large-cap stocks. The fund has beaten the benchmark and category returns in the long run.
Despite the rough patch in 2016, the fund has beaten its benchmark by more than 4 percentage points over a five-year period; over a three-year period, it has outperformed the benchmark by less than one percentage point.
The fund made a strong comeback in 2017, delivering 38 per cent return, beating the benchmark by nearly 5 percentage points.
Fund strategy
The fund follows a growth strategy — investing in stocks that have good growth potential in the long term. While the fund may end up betting on pricey stocks, a large portfolio of 50 stocks mitigates risk.
In 2017, having stocks such as Bharat Forge, Tata Steel, Bajaj Finance, Divis Laboratories, TVS Motor, and Jubilant Foodworks paid off handsomely. These stocks rallied by over 50 per cent. Taking fresh exposure to stocks such as NCC, Bharti Airtel, TCS and ACC also appears to have boosted the fund’s performance.
It reduced exposure to auto, banking stocks while increasing its holdings in defensive IT and pharma stocks.
Over the past two months, as markets turned volatile, the fund further trimmed its exposure to PSU bank stocks, exiting scam-hit Punjab National bank that lost an eye-watering 40 per cent in just two months. The fund has also exited Housing Development Finance, possibly on account of moderating growth prospects. The fund has increased its exposure in stocks such as ACC, Bharat Forge, Bajaj Finance, HDFC Bank and Divis Laboratories, over the past two months — stocks that have boosted performance in the past. Taking cover under fundamentally sound stocks that have been more resilient in their performance in the past can help the fund tide over volatility, going ahead. The fund’s top three sectors are banks, finance and pharma. Around 19 per cent of the corpus is invested in banks. The top five sectors account for 50-55 per cent of the corpus. As of February 2018, SBI (6.33 per cent of assets), HDFC Bank (4.92 per cent), L&T (4.67 per cent), ITC (4.51 per cent) and ICICI Bank (4.25 per cent) are its top stocks.The fund’s expense ratio, at 1.98 per cent as of February 2018, for the regular plan, is far lower than the category average of about 2.4 per cent.
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