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Reliance Small Cap: Impressive Performer
Wed, Apr 25, 2018
Source : Yash Jashnani, Citrus Interactive

Reliance Small Cap Fund is an open ended equity diversified fund. The primary investment objective of the scheme is to generate long term capital appreciation by investing predominantly in equity and equity related instruments of small cap companies and the secondary objective is to generate consistent returns by investing in debt and money market securities. The fund has an AUM of Rs. 6,544 crore which has increased by Rs 3,200 crore compared to March 2017. The fund house has stopped taking further lump sum investments in the fund. Systematic investments of upto Rs. 1 lakh per month are still permitted.

Performance

The fund’s performance across various time horizons is outstanding as seen in the table given below. It has beaten its benchmark in all the time periods. It has also beaten the category average in all the time periods except in the year to date (YTD) period. It is the best performing equity diversified in the last 5 years and among the top 5 in the last 6 months, 1 year and 3-year periods.

Scheme Name

YTD

6 Months

1 Year

3 Years

5 Years

Since Inception

Reliance Small Cap Fund

-9.14

11.08

25.3

21.63

35.91

21.49

 S&P BSE Small-Cap

-11.63

5.47

17.74

16.02

23.95

8.88

Category Average

-6.94

3.07

11.72

10.05

19.49

N.A.

Rank

128/160

3/163

5/159

3/155

1/140

N.A.

Figures are in % as on 31st March 2018; Returns above 1 year in Compounded Annual Growth Rate (CAGR)

In terms of calendar year returns the fund has beaten its benchmark as well as the category average in each of the last 5 calendar years.

Scheme Name

2013

2014

2015

2016

2017

Reliance Small Cap Fund

11.89

97.6

15.11

5.56

62.97

S&P BSE Small-Cap

-11.23

69.24

6.76

1.77

59.64

Category Average

5.09

54.59

3.69

4.56

37.91

Rank

9/141

5/144

7/152

59/157

3/157

Risk: In terms of measures of risk such as standard deviation and beta (measured over the last 3 years) the fund has taken higher risk compared to its category median.

 

Standard Deviation

Beta

Reliance Small Cap Fund

1.05

0.94

Category Median

0.83

0.91

Risk-Adjusted Return: In terms of Sharpe and Treynor Ratio (measured over the last 3 years) the fund has provided higher risk-adjusted returns than the category median.

 

Treynor

Sharpe

Reliance Small Cap Fund

0.09

0.09

Category Median

0.05

0.06

Portfolio

Sector concentration: The fund’s concentration in the top 3, 5 and 10 sectors is lower than the category median.

 

Top 3

Top 5

Top 10

Reliance Small Cap Fund

20.61

29.3

46.83

Category Median

35.49

47

67.27

All figures in %

Company concentration: The fund’s concentration in the top 3, 5 and 10 companies is lower than the category median.

 

Top 3

Top 5

Top 10

Reliance Small Cap Fund

7.16

11.35

20.57

Category Median

18.92

27.49

45.18

All figures in %

Sector and company Concentration signifies that the funds maintain a fairly diversified portfolio.

Number of Equity Holdings: The Fund currently holds 99 stocks in its portfolio (31st March, 2018), which is much higher than the median stock count of the equity diversified category, which currently stands at 50. In the last 5 years the equity holding averages to 65.

Cash Equivalent:        

Its cash equivalent for March is 5.99%. The average cash allocation for the last five years is 4.35%. Its maximum allocation to cash over the last two years is 7.48% in July 2017.

Portfolio Characteristics:

The top 5 sectors include Chemicals, Engineering – Construction, Bank – Private, Engineering – Industrial Equipments and Consumer Food.

In the last 6 months the fund has bought ITD Cementation India Ltd., Orient Electric Ltd., Aurobindo Pharma Ltd., Srikalahasthi Pipes Ltd., Mahindra Logistics Ltd., GAIL (India) Ltd., Century Plyboards (India) Ltd., Greenply Industries Ltd., KPR Mill Ltd., LT Foods Ltd., Varun Beverages Ltd., HT Media Ltd., Astrazeneca Pharma India Ltd., Future Supply Chain Solutions Ltd., Alembic Pharmaceuticals Ltd., HG Infra Engineering Ltd., Galaxy Surfactants Ltd., Timken India Ltd., Magma Fincorp Ltd., Somany Ceramics Ltd., Carborundum Universal Ltd., Entertainment Network (India) Ltd., Mahindra Holidays & Resorts India Ltd. and Mcleod Russel India Ltd.

Stocks of Amber Enterprises India Ltd., MAS Financial Services Ltd., and TV Today Network Ltd. have been bought and sold in the last 6 months. Stocks of Arman Financial Services Ltd., Automobile Corporation of Goa Ltd., Bank Of India, Bharat Road Network Ltd., Capacite Infraprojects Ltd., Chambal Fertilisers & Chemicals Ltd., Delta Corp Ltd., Goodluck India Ltd., Greaves Cotton Ltd., Max Ventures And Industries Ltd., Unichem Laboratories Ltd. and Claris Lifesciences Ltd. have been dropped from its portfolio.

Process

Reliance Small Cap Fund is an open ended small cap fund. The fund primarily seeks to invest in a portfolio of small cap stocks. The fund focuses on identifying good growth businesses with reasonable size, quality management and relatively lower valuation. The portfolio has a mix of growth, economic revival, value and thematic plays. The portfolio will be structured in a manner so as to keep risk at acceptable levels through various measures such as diversification across sectors and stocks. 

At least 65% of the portfolio will be invested in equity and equity related securities of small cap companies. A maximum of 35% can be invested in debt and money market instruments.

Fund Manager

Samir Rachh

Mr. Samir Rachh is a Fund Manager at Reliance Nippon Life Asset Management Limited. He was previously an Assistant Fund Manager and a Senior Investment Analyst. Mr. Rachh specializes in mid cap stocks at the firm. He joined Reliance Nippon Life Asset Management Limited in October 2007. He has been managing Reliance Small Cap Fund since January 2017. Prior to this, Mr. Rachh spent two years as the Head of PMS and Portfolio Manager at Emkay Global Financial Services Ltd. He had earlier served as the firm's Head of Institutional Research for two years. Prior to that, Mr. Rachh served as a Portfolio Manager at Hinduja Finance Ltd. for five years managing funds and research. Prior thereto, he spent three years as a Managing Partner at Anvicon Research Associates. Mr. Rachh founded the firm. Before that, he spent five and a half years as an Assistant Editor at Capital Market Magazine. Mr. Rachh specializes in mid cap/small Cap stocks. He has a vast investment experience. Mr. Rachh has received a B.Com. degree from V G Vaze (Kelkar College), University of Mumbai. Other funds managed by Mr. Rachh are Reliance Small & Midcap Fund and Reliance Regular Savings Fund – Equity Option.

Dhrumil Shah

Mr. Dhrumil Shah is the Assistant Fund Manager – Equity Investments at Reliance Nippon Life Asset Management Limited. Mr. Shah has over 11 years of experience in equity research and fund management. Prior to Joining Reliance MF, he was managing mid cap fund as well as large cap funds at Birla Sun Life. Prior to Birla Sun Life, he was associated with ASK Investment Managers as a portfolio manager. Mr. Dhrumil Shah is a graduate from Mumbai University and a Qualified Charted Accountant.

Our View

Reliance Small Cap Fund continues to be among the best performing funds in all the time horizons except YTD period. It is a high risk equity fund because of its exposure to small cap stocks. Hence the fund tends to be volatile, especially in falling markets. The fund has done well due to the stock picking skills of the fund manager. The fund can be considered if the investor is willing to take high risk for a certain part of the portfolio depending on the risk profile.

 

 
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