Anil Ambani’s Reliance Mutual Fund boosts its holdings in Mukesh Ambani’s RIL
Moneylife Digital Team 10 November 2011

The brothers may not see eye-to-eye but across most of the schemes, Reliance Mutual Fund is a big investor in RIL. Sadly, it has cost RMF investors dearly

One of the most celebrated cases of sibling rivalry in India has been that of Mukesh and Anil Ambani. The two brothers split the Reliance empire and Anil Ambani came to control Reliance Mutual Funds. However, when it comes to investing, Reliance Mutual Fund has Reliance Industries Ltd (RIL) as one of its top picks. The reason is not sibling love. It is the compulsions of fund investing –though it has meant a significant loss for Reliance Mutual Fund investors.

RIL is among the top 10 holdings in eight of the fund’s 11 schemes. Many of these schemes are doing badly for the last one year. One of the major reasons for such underperformance could be heavy investment in RIL, one of the most underperforming stocks among the index heavyweights. Undeterred, the schemes increased their stakes in RIL in September.

One of the biggest investors in RIL was Reliance Regular Savings Fund (RSF). It has actually included RIL in its portfolio in September as a new entry. Reliance NRI Equity increased its stake too in RIL in September as has Reliance Equity Fund.

The reason for such love for is that RIL is a heavyweight in the benchmarks, but it has been grossly underperforming for over two years since June 2009. It is a top 10 holding of more than 100 fund schemes among a total of 215-odd equity schemes and 57 of the 100 largest schemes. The stock was at Rs1,140 at the end of May 2009, after rising from a low of Rs560 in March to over Rs1,200 in mid-May following the big jump after the general elections. From that point onwards, RIL has wilted, belying its size, profile and new initiatives, to Rs713 in August 2011. In the process, it underperformed the Sensex as its retail initiatives hit several roadblocks and the gas reserves turned out to be hard to exploit. When Sensex was at just 9,700 points Reliance was at Rs760 in March-end 2009. When the Sensex was at 15,800 level at its monthly lowest in August 2011, Reliance had hit Rs714. It moved up sharply in October to almost Rs900.

Fund have been slow to avoid RIL when it underperformed and as we can see Reliance MF has been eager to load up in the stock in September.

This is simply because mutual funds are primarily managed with an objective to “stay as close as possible to the benchmark.” One way not to underperform the benchmark is to be substantially invested in benchmark heavyweights.

Sanjeev Sangai
1 decade ago
What happened to Moneylife?. It looks like concept of "Breaking News" has entered into Moneylife. We read Moneylife for News that has some significance. But it looks like from news about “IDFC MF” or “Savings bank interest-rate deregulation makes liquid funds irrelevant” looks like very premature. Articles are not covering all accepts. SBI who hold major part of savings account not increasing interest rates & most imp part is taxation which is not considered at all?. In case of IDFC you are questioning the Fund Manager who has generated the highest returns for last 5 years. Also in this article there is no News. It is usual business. If fund Manager has not invested then you may have asked him in another way. Please maintain your standard. There are lot of others in the market who provides this food.Pl don’t become one of them.
Replied to Sanjeev Sangai comment 1 decade ago
We do need articles like this to post the investor the facts on ' why the underperformance". It also goes to prove that Reliance Group has not influenced Moneylife.
Milind Chitnis
Replied to Sanjeev Sangai comment 1 decade ago
I second you Sanjeev. Where is the news in this article?
Replied to Milind Chitnis comment 1 decade ago
One man's dessert is another man's poison.
I respect you views but I find nothing wrong with the article. Its is nice twist to the Ambani story plus as usual there is a Moneylife stamp - it talks about the underperformance of the Reliance MF scheme and WHY. Have you seen other media companies writing this ? I haven't. All the best
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