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S. Vaidya Nathan

INVESTORS in SBI Magnum Taxgain may remain invested as the mid-cap-stock focussed strategy has led to a substantial improvement in its performance. If the returns over a three-year period appear impressive, it is due to the spurt in the NAV over the past year and a half.

The NAV has more than doubled during this period, comfortably outpacing benchmark indices as well as a host of peer funds. The mid-cap tilt and the stocks that figure in the portfolio could enable it maintain the improvement in performance witnessed over the past year and half.

Investors can, however, add to their exposures in small lots over a period of time, especially when there is a 10-15 per cent decline in equity prices. This approach will help avoid locking up funds at higher levels of stock prices.

This would also enable investors to keep track of whether Magnum Taxgain is able to sustain the momentum it has shown over the past year before commenting fresh funds.

The long-term performance and consistency across quarters remains modest; it has generated annual returns of about 10 per cent from its launch in the first quarter of 1993, and over the past five years.

Funds such as Prima and Bluechip, which were launched a few months later, have a far more impressive track record across quarters and time periods.

Suitability: The mid-cap focus pegs the risk of the fund higher than a diversified fund. Magnum Taxgain has so far not delivered the returns that could compensate investors for the enhanced risk element. The fund is appropriate for investors with a higher appetite for risk. Even for such investors, we would suggest exposures in HDFC Taxplan 2000 and HDFC TaxSaver ahead of Magnum Taxgain, if they do not have exposures in these two funds.

Portfolio overview: With the exception of Mahindra & Mahindra, Satyam Computer, Gujarat Ambuja Cements and Indian Oil (which account for about 25 per cent of assets), the portfolio is laden with mid-cap stocks. Engineering, chemicals, auto and IT are the preferred sectors, and collectively account for about 40 per cent of assets.

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