The Hindu Business Line : SBI Magnum Taxgain: Invest

AN INVESTMENT can be considered in SBI Magnum Taxgain in phases. The fund continues to top the performance charts. The fund with its mid-cap bias comes with a higher risk profile than a typical diversified fund. Over the past two years, its returns have compensated investors well for the risk assumed.

The performance perked up from 2000-01, when it had sharply underperformed its peers. Like all other tax-saving funds, it comes with a three-year lock-in period. This might be a worrisome feature for those who are apprehensive about entering the market at this point.

But investors who are willing to stick with equity over the long term may consider the fund. The lock-in period also works to the advantage of tax-saving funds, as flows into and out of the fund tend to be more stable. Investments can be made by way of a systematic investment plan, to minimise the risk of bad timing.

The fund has been an impressive performer since 2003. It was the top performer in 2004 with a return of 55 per cent. Over the past year, it has delivered a return of 130 per cent, beating the average 60-per cent return of other diversified equity funds by a mile.

Tightly packing its portfolio with mid-caps helped the fund's performance in 2004 and in early 2005. However, the fund has a flexible allocation strategy and tends to swing between mid-caps and large caps depending on relative valuations. SBI Magnum Taxgain has also raced ahead on the back of superior stock selection. Stocks such as Thermax, Crompton Greaves and Praj Industries that were present in its portfolio in July 2004 continue to figure prominently among its top holdings.

The fund has consciously cut back on its mid-cap holdings in recent months. In January, barring Gujarat Ambuja, there was no other prominent large-cap stock in the portfolio. As of July, however, as much as 50 per cent of its assets were invested in stocks with a market capitalisation of over Rs 2,000 crore. The presence of more large-caps in the portfolio is a positive, as they tend to outperform large-caps in a market downturn.

The asset base has grown dramatically over the past year. The assets under management are now about Rs 200 crore, compared to about Rs 50 crore in July 2004. The fund takes concentrated exposures on stocks. The top ten accounts 56 per cent of the assets. The fund favours stocks in the engineering sector, which now accounts for 20 per cent of the total assets.

Fund facts: SBI Magnum Taxgain was launched in 1993. The minimum investment amount is Rs 500. Investments in the fund would attract tax savings under Sec 80 C.

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