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Shanthi Venkataraman

INVESTORS can hold on to their units in Prudential ICICI Tax Plan. The fund has outperformed its benchmark the Nifty, both in bull and bear markets. Its performance in recent months, however, lags that of its peers.

Suitability: The fund has a bias towards mid-caps. Although mid-caps stocks help in boosting returns of the portfolio, they are, in general, more volatile. This enhances the risks associated with the fund, vis-à-vis a fund with a large-cap focus. The fund is suitable for investors who are looking for tax concessions.

Investors may also choose the dividend option, as dividends in the hands of investors are exempt from tax. Investors who wish to take exposure to a tax-saving fund may consider funds such as Alliance Capital Tax Relief or HDFC Tax Saver ahead of this fund, as they have a better track record.

Performance: The fund has turned in a return of 57 per cent over the last year, outpacing the Nifty by about 20 percentage points. It, however, does not appear to have handled the falling market in the recent months, nearly as well as its peers. It has shed about 11 per cent since January, as against its peer, Alliance Capital Tax Relief, which declined only about 3 per cent.

In this period, its focus on mid-caps has also not helped, although most mid-caps have weathered the falling markets better than large-cap stocks. The fund suffered reversals during the Jan-March quarter. However, it recouped some of its losses subsequently. Significant cash holding at about 12 per cent appears to have helped the fund recover some of its loss in value.

Portfolio composition: The fund is fairly diversified. The top three sector -holdings account for about 35 per cent of total assets. Exposure to the Oil, Chemicals and Metals sector exposes it to commodity cycles. SAIL and Tata Power are the only two large-cap stocks in the fund's portfolio. The fund has a small asset base of about Rs 30 crore, which provides the manager flexibility.

Fund facts: PruICICI Tax Plan, an open-ended equity fund was launched in August 1999. The minimum investment amount is Rs 500. An entry load of 2 per cent is charged for investments less than Rs 3 crore.

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