The Hindu Business Line : SBI Magnum TaxGain: Invest

In the light of the anticipated volatility, a phased investment in the fund will reduce the risk of exposing a large sum of money to the market at one go.

An investment can be considered in SBI Magnum TaxGain. Its performance continues to be impressive and it remains at the top of the charts among the tax-saving funds over one- and three-year periods.

Over the past year, it has delivered a return of 110 per cent, almost matching the returns of its diversified counterparts such as Magnum Multiplier Plus and Magnum Global. In recent months it has lost some steam, but it has still managed to beat the category average.

Magnum TaxGain appears to have a flexible investment strategy. From being a largely mid-cap fund, it has over the year, increased its allocation to large-cap stocks, as have other funds in the Magnum fold. It now sports a blend of large- and mid-cap stocks and bears a risk profile akin to that of a typical diversified fund.

Investments in the fund will, however, be subject to a three-year lock-in period and are subject to risks of a market downturn. Those looking for tax-savings and have exhausted other small-savings options may consider this fund. Investors should, however, considerably tone down their return expectations, as the spectacular gains witnessed over the past few years is unlikely to be repeated. In the light of the anticipated volatility, a phased investment in the fund will reduce the risk of exposing a large sum of money to the market at one go.

Portfolio overview

Over the past year, the asset base of Magnum TaxGain has swelled to Rs 450 crore, which is a six-fold jump. This still remains relatively small compared to other diversified funds. The higher asset base has resulted in its portfolio undergoing a sea change. It is now packed with a larger number of stocks and thus wears a more diversified look; earlier it took more concentrated bets on stocks. A part of this shift can be partly explained by the higher cash levels that the fund has maintained in recent months. As of February 2006, it held a significant 22 per cent in cash. This could also account for the slight slowdown in performance in recent months.

The fund has held steadfastly to the stocks of Crompton Greaves and Praj Industries, in which it was an early entrant. Large-cap IT stocks such as Infosys and Wipro now stand out prominently in its portfolio.

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