The Hindu Business Line : `DBS has wide access to some major Asian markets'

ARE tax-saving schemes still a fad or will they actually find a firmer foothold this time? Mr Sashi Krishnan, CEO of Cholamandalam MF, thinks investors should opt for tax-savers for more reasons than one.

He also discusses a few other issues with Business Line.

Excerpts:

Are investors genuinely interested in tax-saving funds yet?

We have to bear in mind how these funds have lately performed, a feature that some sections of the market seemed to have overlooked. The tax-savers require investments to be locked in for three years, a period that can be used to one's advantage. As you will appreciate, their main strength is drawn from the saving they offer to the taxpayer. Add to this the impact of the newly-introduced Section 80C of the I-T Act.

Factors such as these are now being appreciated more than before.

But tax-savers are also being sold on the premise that they give "superior returns"...

Compared to other tax-saving options, also important in the context of the relevant income tax norms, the ELSSs (that is, equity linked savings schemes) try to identify stocks that have the potential to appreciate in value. These funds have a diversified portfolio, invested in quality stocks. The aim is simple: Deliver good returns to their unit holders. This is the basic proposition.

Isn't it easier to just invest in normal diversified growth funds?

Well, in that case there will be no compulsory lock-in. The latter, in the case of an ELSS, allows the fund manager to be somewhat more comfortable. I refer to the redemption compulsions that sometimes impact the portfolios of diversified growth schemes.

Stocks may be volatile in the short term. However, for a longer duration, the uncertainty may be a trifle lower.

Do you think the mid-cap rally is finally over?

We can safely assume that small- and mid-cap stocks will have their share of volatility in the future, perhaps more than what the large-caps may face.

Investors, who have lately witnessed some decline in mid-cap prices, now want to know whether this segment will see fresh upside in the days ahead. They should bear in mind its largely unpredictable nature. This is not to say that smaller companies are not doing well on the performance front.

Many of them are doing just fine, as the latest performance figures will no doubt indicate.

Any developments with regard to Chola MF's planned links with DBS?

We stand by our previously-stated position. DBS, as we have told before, has wide access to some of the major Asian markets. It has a fair range of products.

In India, where we offer a number of equity, debt and money market products, there will be a good cultural fit. From the cultural point of view, this will not be a market that is totally alien to them. Chola AMC, which has a strong parentage in the Murugappa group, is now present in over a dozen locations and has worked out a strong distribution network. We hope to come up with some news soon.

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