Skip to main content

Reliance Small Cap Fund

 

Reliance Small Cap Fund Invest Online

 
Mid and Small Cap Funds article in Advisorkhoj - Reliance Small Cap Fund gave more than 2 times returns in the last 3 years
 

Small and midcap stocks have the potential to give higher returns than large cap stocks in a bull market. These stocks usually get beaten down more in market corrections, but good quality mid cap stocks rebound strongly when strength returns to equity markets. Over the past few months midcap stocks are rallying smartly, outperforming large cap stocks. In fact, over the last 3 years small and midcap funds as a category has clearly outperformed large cap funds by a big margin. Please see the chart below for the comparison of trailing annualized returns between midcap funds and large cap funds over the last 1, 2 and 3 year periods.

Mid & Small Cap Funds - Comparison of trailing annualized returns between midcap funds and large cap funds

Within the small and midcap funds category, the Reliance Small Cap fund has given an exceptional performance, and is clearly the one of the best midcap funds over the last few years. Not only has it given the highest return in the last one year among all small and midcap funds, it has outperformed the category also in terms of two and three year trailing returns and generated superior alphas compared to most of the other small and midcap funds. Please see the chart below for the trailing annualized returns of Reliance small cap fund for 1, 2 and 3 years, in comparison with Midcap funds and the benchmark CNX Midcap index.

Mid & Small Cap Funds - Comparison of annualized returns between Reliance small cap fund, Midcap funds and CNX Midcap index

Fund Overview

This fund is suitable for investors with high risk tolerance, looking for high capital appreciation over the long term. However, investors in this fund should be comfortable with high volatilities of NAVs and returns. As such the fund is suitable for investors who have a sufficiently long time horizon. The fund was launched in September 2010. It has an AUM base of about Rs 566 crores. The expense ratio of this fund is 2.52%. The fund manager of this scheme is Sunil Singhania. The scheme is open both for growth and dividend plans. The current NAV (as on Aug 28 2014) is 20.43 for the growth plan and 18.68 for the dividend plan. The fund has been ranked 1 by CRISIL in its most recent mutual fund ranking. Morningstar has a 4 star rating for this fund.

Portfolio Construction

The portfolio has a bias for small and midcap stocks with high growth potential. In terms of sector allocations, the portfolio is heavily weighted towards cyclical sectors like Chemicals, BFSI, Cement & Construction, Engineering and Automobiles. In terms of company concentration, the portfolio is very well diversified with its top 5 holdings, accounting for only 19% of the total portfolio value. Even the top 10 stock holdings account for less than 32% of the portfolio value. The fund manager allocates 18% of his portfolio in cash and cash equivalents, to meet liquidity needs and leverage investment opportunities.

Mid & Small Cap Funds - Sector Composition and Top 5 Holdings of Reliance small cap fund

Comparison with Peer Set

A comparison of annualized returns of Reliance Small Cap fund versus its peer set over various time periods shows why this fund is considered a top pick in its category. See chart below for comparison of annualized returns over one, three and five year periods. NAVs as on August 28 2014.

Mid & Small Cap Funds - Comparison of trailing annualized returns with Peer Set

Risk & Return

From a risk perspective, the volatility of the fund is slightly on the higher side. The annualized standard deviation of monthly returns of Reliance Small Cap Fund is 23.76%, which is on the higher side even relative to the riskier small and mid cap category. While the high volatility is definitely a watch out for the fund from a risk perspective, the risk adjusted return of the fund is very attractive. On a risk adjusted basis, as measured by Sharpe Ratio, the fund has outperformed the diversified category. Sharpe ratio is defined as the ratio of excess return (i.e. difference of return of the fund and risk free return from Government securities) and annualized standard deviation of returns. Higher the Sharpe ratio better is the risk adjusted performance of the fund. See charts below for comparison of volatilities and Sharpe ratios between Reliance Small Cap fund and small and midcap funds category.

Mid & Small Cap Funds - Comparison of volatilities and Sharpe ratios between Reliance Small Cap fund and small and midcap funds category

Rs 1 lac lump sum investment in the Reliance Small Cap fund NFO (growth option) in September 2010 would have doubled by August 28 2014. The chart below shows the growth of Rs 1 lac investment in the Reliance Small Cap fund (growth option).

Mid & Small Cap Funds - Growth of Rs 1 lac investment in the Reliance Small Cap fund (growth option)

A SIP investment in the Reliance Small Cap fund would have performed even better. The chart below shows the returns since inception of Rs 3000 invested monthly through SIP route in the Reliance Small Cap fund (growth option). The SIP date has been assumed to be first working day of the month. The chart below shows the SIP returns of the fund. NAVs as on August 28 2014.

Mid & Small Cap Funds - SIP returns since inception of Rs 3000 invested monthly in the Reliance Small Cap fund (growth option)

A Rs 3000 monthly SIP in the Reliance Small Cap fund (growth option) since inception would have grown to almost Rs 3 lacs as on August 28 2014, while the investor would have invested a little over Rs 1.4 lacs. This implies that the fund gave a SIP return of over 37% since inception. Very few mutual fund investments give that kind of returns over a 3 – 4 year period.

Conclusion

The Reliance Small Cap fund has delivered strong performance since its inception. With the improving sentiments in the Indian equity markets the fund seems poised to deliver even stronger performance in the future. Investors with high risk tolerance can consider investing in the fund through the systematic investment plan (SIP) route for their long term financial planning objectives. Even though small and midcap funds like Reliance Small Cap fund can give higher returns than large cap or diversified equity funds, investors should also remember that the risk associated with small and midcap funds are higher. Investors should consult with Prajna Capital if this fund is suitable for their investment portfolio, in line with their risk profiles.

-----------------------------------------------
Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds

Top 10 Tax Saving Mutual Funds to invest in India for 2016

Best 10 ELSS Mutual Funds in india for 2016

1. BNP Paribas Long Term Equity Fund

2. Axis Tax Saver Fund

3. Franklin India TaxShield

4. ICICI Prudential Long Term Equity Fund

5. IDFC Tax Advantage (ELSS) Fund

6. Birla Sun Life Tax Relief 96

7. DSP BlackRock Tax Saver Fund

8. Reliance Tax Saver (ELSS) Fund

9. Religare Tax Plan

10. Birla Sun Life Tax Plan

Invest in Best Performing 2016 Tax Saver Mutual Funds Online

Invest Online

Download Application Forms

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

---------------------------------------------

Leave your comment with mail ID and we will answer them

OR

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

OR

Leave a missed Call on 94 8300 8300

-----------------------------------------------

Popular posts from this blog

Tata Mutual Fund

Being a part of the Tata group, the fund has the backing of a very trusted brand name with strong retail connect. While the current CEO has done an excellent job in leveraging the Tata brand name to AMC's advantage, it is ironic that this was just not capitalised on at the start. Incorporated in 1995, Tata Mutual Fund remained an 'also-ran' fund house for around eight years. Till March 2003, it had a little over Rs 1,000 crore in assets and 19 AMCs were ahead of it. But soon after that the equation changed. It was the fastest growing fund house in 2004 and 2005. During these two years, it aggressively launched six equity funds, two debt funds and one MIP. The fund house as of now stands at No. 8 in terms of asset size. This fund house has a lot to offer by way of choice. And, it also has a number of well performing schemes. Tata Pure Equity, Tata Equity PE and Tata Infrastructure are all good funds. It also has quite a few good debt funds. The funds of Tata AMC are known to...

UTI Mutual Fund

Even though only a few of UTI’s funds are great performers, this public sector fund house has many advantages that its rivals do not. It has a huge base of retail equity investors and a vast distribution network. As a business, it looks stronger than ever, especially in the aftermath of credit crunch. UTI is, by a large margin, the most profitable fund company in the country. This is not surprising, since managing equity funds is more profitable than debt. Its conservative approach and stable parentage is likely to make it look more attractive to investors in times to come. UTI’s big problem is the dragging performance that many of its equity funds suffer from. In recent times, the management has made a concerted effort to improve performance. However, these moves have coincided with a disastrous phase in the stock markets and that has made it impossible to judge whether the overhaul will eventually be a success. UTI’s top performers are a few index funds, some hybrid funds and its inf...

Salary planning Article

1. The salary (basic + DA) should be low. The rest should come by way of such allowances on which the employer pays FBT and you don't pay any tax thereon. 2. Interest paid on housing loan is deductible u/s 24 up to Rs 1.5 lakh (Rs 150,000) on self-occupied property and without any limit on a commercial or rented house. 3. The repayment of housing loan from specified sources is also deductible irrespective of whether the house is self-occupied or given on rent within the overall ceiling of Rs 1 lakh of Sec. 80C. 4. Where the accommodation provided to the employee is taken on lease by the employer, the perk value is the actual amount of lease rental or 20 per cent of the salary, whichever is lower. Understandably, if the house belongs to a family member who is at a low or nil tax zone the family benefits. Yes, the maximum benefit accrues when the rent is over 20 per cent of the salary. 5. A chauffeur driven motor car provided by the employer has no perk value. True, the company would...

8 Investing Strategy

The stock market ‘meltdown’ witnessed since the start of 2005 (notwithstanding the recent marginal recovery) has once again brought to the forefront an inherent weakness existent in our markets. This is the fact that FIIs, indisputably and almost entirely, dominate the Indian stock market sentiments and consequently the market movements. In this article, we make an attempt to list down a few points that would aid an investor in mitigating the risks and curtailing the losses during times of volatility as large investors (read FIIs) enter and exit stocks. Read on Manage greed/fear: This is an important point, which every investor must keep in mind owing to its great influencing ability in equity investment decisions. This point simply means that in a bull run - control the greed factor, which could entice you, the investor, to compromise with your investment principles. By this we mean that while an investor could get lured into investing in penny and small-cap stocks owing to their eye-...

Debt Funds - Check The Expiry Date

This time we give you an insight into something that most debt fund investors would be unaware of, the Average Portfolio Maturity. As we all know, debt funds invest in bonds and securities. These instruments mature over a certain period of time, which is called maturity. The maturity is the length of time till the principal amount is returned to the security-holder or bond-holder. A debt fund invests in a number of such instruments and each of these instruments would be having different maturity times. Hence, the fund calculates a weighted average maturity, which would give a fair idea of the fund's maturity period. For example, if a fund owns three bonds of 2-year (Rs 30,000), 3-year (Rs 10,000) and 5-year (Rs 20,000) maturities, its weighted average maturity would be 3.17 years. What is the big deal about average maturity then, you may ask. Well, knowing a fund's average maturity is important because it tells you how sensitive a fund is to the change in interest rates. It is ...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now