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S. Vaidya Nathan

EXPOSURES can be considered in HDFC Tax Plan 2000, as the fund has an impressive track record. Investment can, however, be done in phases as it would enable investors to take advantage of any weakness in the broad market.

It may also be better to wait for the results of the elections, as there may be downside risk to equities linked to this factor. For long-term investors, any decline in equity prices would provide a good opportunity to buy into a fund that has performed well across both bullish and bearish phases.

Investments in this fund qualify for rebate under Section 88 of the Income-Tax Act; however, a three-year lock-in period applies in such cases.

Investors seeking exposures to mid-cap stocks can consider an investment even if they cannot take advantage of the tax benefits. With Franklin's Prima, HDFC Tax Plan 2000 has been one of the superior performers in the mid-cap stocks space.

We believe that the fund's investment management approach — the willingness to stand apart from the crowd in terms of sector and stock preferences and its top holdings — hold the potential to deliver attractive long-term returns.

The consistent performance over the past three-and-half years — annual returns since launch have been about 50 per cent — should make investors comfortable. Over the past year, the fund is among the superior performers, its NAV rising by 140 per cent.

HDFC Tax Plan's portfolio continues to tilt towards mid-cap stocks. It has limited exposures to the fancied auto, banking, oil and pharmaceutical sectors.

The fund places emphasis on the engineering and electronics sectors, which account about 20 per cent of its assets. Themes that are linked to sustained industrial recovery and an improvement in the industrial investment have also been favoured.

For instance, exposures to stocks such as Goodlass Nerolac, MICO and Shanthi Gears provide a window to capitalise on opportunities in the auto sector at valuation levels that carry limited downside risk.

Suitability: The focus on mid-cap stocks enhances the risk profile. The fund's performance has, however, ensured that investors have been more than adequately compensated for the higher risk element.

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