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Relying on Reliance

Aabhas Pandya

The perils of one-stock fund notwithstanding, Unit Trust of India's Petro Fund continues to survive the carnage on the bourses with a 60.39 per cent exposure to Reliance Industries as on March 31, 2000. Reliance Industries and Hindustan Petroleum Corporation (HPCL) account for 77 per cent of the total portfolio of the fund. In the two months since March 1, 2000, UTI's Petro Fund has been the only gainer in the category of open-ended diversified and sectoral funds.

During this period, the net asset value (NAV) of the fund has gained 15.25 per cent from Rs 10.03 on March 1 to Rs 11.56 on April 28, 2000. During the period, the fund's NAV touched a high of Rs 12.33 on April 10, up 23 per cent from its March 1 level. The Petro Fund has a unit capital of Rs 320 million as on March 31, 2000. This translates into total assets under management of Rs 370 million as on April 28.

Between December 31, 1999 and March 31, 2000, the scheme has seen its unit capital vault by 255 per cent from Rs 90 million to Rs 320 million. Given the current assets under management, Reliance accounts for a whopping Rs 223.4 million while both HPCL and RIL have a combined share of Rs 285.2 million.

In the last two months, Reliance Industries has gained 9.46 per cent to Rs 347 from its March 1 level of Rs 317. On April 10, when the Reliance scrip hit its two-month high of Rs 363 on buyback expectations, the fund's NAV also peaked at Rs 12.33. However, with the market not enthused by the buyback price of Rs 303, both Reliance and the fund's NAV took a beating.

While Reliance lost around 18 per cent, UTI Petro's NAV dropped close to 10 per cent to Rs 11.13 in five days. It seems the fund manager was able to liquidate a part of his holdings before Reliance was hammered on news of the buyback price. On the other hand, HPCL has been on a fall since March 1, losing 32 per cent to end at Rs 112 on April 28.

With UTI Petro heavily concentrated in Reliance, the fund's NAV will be highly volatile. Since Reliance is one of the heavyweights on the bourses, any negative development, specific to the stock or the market in general, could see UTI Petro's NAV plummet.

Source: Value Research

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