Wednesday, June 3, 2009

RELIANCE DIVERSIFIED POWER SECTOR FUND - HOLD

04 June 2009
Srikanth Shankar Matrubai

With the Indian nuclear story emerging and the current Peak Power deficiet of India still in double digits, Power Sector is bound to show Impressive growth in the coming years.
The Fund's performance compared to its Benchmark has been nothing short of spectacular.
But the biggest strong point AGAINST the Power Stocks is, the Tariff is regulated by the Govt of India and also there is a limit on how much you can earn. So, while the potential is huge, the profit margin is limited thus limiting your profit too.

Sector Funds tend to be very volatile and this Fund, though recommended, should not form a part of your Core Portfolio. Your Core Portfolio's focus should be Diversified Equity Funds. Every Fund Manager will invest part of corpus in Good Performing Sectors. And if he sees Power Sector as promising, he will invest in them too. And your exposure to Power Sector is there through that fund, so why invest separately in a Sector Specific fund.
Being Highly Volatile, This Fund needs to constantly monitored and nimble investors who can enter and exit at right time. Surely, a Fund manager is at a much better position to do this tedious job of entering and exiting Sectors constantly.


RECOMMENDATION :
The Power Sector is definitely attractive and Reliance Diversified Power Sector Fund should be obvious choice among the Sector Funds. Its performance too has been quite good for a Sector Fund, obviously because of its slightly diversified holdings.
Sector Funds should form only a small minuscule percentage of your overall holding. You are always better off investing in a Diversified Equity Fund which will definitely have stocks from power Sector, if they are attractive and hold promise. The Fund's Huge Corpus too is a turn off.
Aggressive investors and those who can judge the Sector can continue to hold their investments in the fund, add further through sips and on dips though in moderate quantity.

Best of luck,

Srikanth Shankar Matrubai

Also visit http://equityadvise.blogspot.com for an indepth Equity Analysis

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