• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

S. Vaidya Nathan

AN investment may be considered in PruICICI Tax Plan as part of a portfolio of tax-saving funds. The fund has through an aggressive strategy moved to the forefront of performers in this category. It has benefited from a wide-ranging exposure to mid-cap stocks and a few select large-cap stocks and the several phases of re-rating that mid-cap stocks have enjoyed over the past few years.

The fund has provided returns of about 80 per cent over the past year and annual returns of about 50 per cent over the past three years. Its track record since 1999 is also fairly impressive as it outperformed the benchmark indices comfortably. Investment in a systematic manner over time in this fund would have offered a higher return.

In this backdrop, we would suggest that investors take exposures in small lots; phasing out investments would also ensure that they benefit from any weakness in broad market trends.

From next fiscal, investments in such funds can potentially go up to Rs 1 lakh, which would be available as a deduction from income while computing tax. We would prefer a portfolio that has HDFC Long Term Advantage, HDFC TaxSaver, SBI Magnum TaxGain and Prudential ICICI Tax Plan.

Investors seeking options for FY05 can contemplate exposures in this fund as only a few days are left to avail of the rebate under Section 88 (limit: Rs 10,000). The three-year lock in period need not be viewed as a negative as a tight check on hot flows has helped tax saving funds post a better performance than several diversified equity funds.

Suitability: The fund's investment strategy has a higher degree of risk than a typical diversified fund. It has, however, delivered attractive returns for investors that compensate for the risk element involved. Investors could choose the dividend option due to its superior tax efficiency.

Portfolio overview: The fund has capitalised on the momentum in the market to reap sizeable gains without compromising much on the quality of exposures. Exposures to stocks such as Aban Lloyd, Crompton Greaves, Taj GVK Hotels, Monnet Ispat, Sintex Industries and KPIT Cummins are a few instances of aggressive stock selection that has paid off.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Trends in mutual fund flows — Is shift to equities sustainable?

Copyright © 2005, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line