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Our Bureau

Kolkata , Oct. 6

Fidelity Mutual Fund has mooted its second fund, an equity linked savings scheme (ELSS).

The proposed Fidelity Tax Advantage Fund will seek to generate long-term capital appreciation by investing in a diversified portfolio of primarily equity and equity-related instruments.

Investors will be entitled to deductions of the amount invested, subject to a maximum of Rs 1 lakh, under the newly introduced Section 80C(2)(xiii) of the Income-Tax Act, 1961. This implies that units issued under the scheme cannot be redeemed before three years from the date of allotment.

The investment strategy to be adopted by the tax-saver will be similar to that of the MF's maiden product, Fidelity Equity Fund, the offer document filed with SEBI has mentioned. However, it may differ to a certain extent on account of the mandatory lock-in period. While some investments may be made in money market instruments because of defensive considerations, there will be no allocation to derivatives of any kind.

Fidelity Tax Advantage, to be benchmarked against the BSE 200 index, will try bottom up stock picking, with no sector or capitalisation bias. It will diversify across industries by normally investing in 60-80 stocks. A single holding in an individual stock will usually not exceed 4 per cent of the net assets. Exposure to stocks will not decline below 80 per cent of the assets.

A sneak glimpse into maiden Fidelity equity: The offer document of the ELSS indicates that Fidelity Equity, which was launched in May , had run up initial issue expenses of Rs 35.26 crore. Of this, Rs 26.50 crore was charged to the scheme (to the extent of entry load), while Rs 8.75 crore was borne by the asset management company. The fund, which too had BSE 200 as its benchmark, has clocked 26 per cent absolute returns, compared to 17.08 per cent recorded by the index.

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Fidelity moots second fund

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