The Hindu Business Line : SBI Magnum Tax Gain: Invest

An investment can be considered in SBI Magnum Tax Gain. It's three- and five-year returns are impressive and have outpaced it immediate peers by 13 percentage points over a three-year period. The fund bounced back from it low of 2001 and the bull run of 2003 helped it recoup lost ground.

Like most tax-saving funds, Magnum Tax Gain rode the mid-cap rally in 2003 and 2005, recording returns of 133 per cent and 96 per cent respectively. The portfolio has been skewed towards mid-caps for the past year and, after the correction in the space in October 2005, it acquired a large-cap bias. In the latest portfolio, stocks with a market capitalisation of less than Rs 2,500 crore account for 25 per cent.

The turnaround and shift towards large-caps can mitigate the find's risk profile. Investors with a moderate risk profile can consider investment in this fund through the systematic investment route to minimise market risk.

The superior performance, even compared with open-ended diversified funds, makes it an ideal investment opportunity for an investor looking beyond tax benefits. An investment in the fund is eligible for tax benefit under Section 80C with a three-year lock-in period.

Performance: The fund's NAV has grown 43 per cent over the past year and it marginally outpaced it benchmark index, the BSE-100. Even funds such as HDFC Tax Saver and Franklin Tax Shield, despite their large-cap bias, have not kept pace with this return.

It appears that in spite of having a higher exposure to mid-caps than its peers, the fund has the knack of selecting the right stocks to generate consistent returns.

In the past two years, the fund trailed its benchmark on seven occasions on a rolling-return basis. This implies that it is able to perform consistently under different market conditions.

Portfolio Overview: The fund has a well-diversified portfolio with 56 stocks. The fund prefers to restrict single-stock exposure below 5 per cent and the top ten account for 35 per cent of the portfolio.

However, it takes some concentrated bets on sectors; the top three sectors accounted for 44 per cent. The fund appears to adopt a buy-and-hold strategy and is low on portfolio churning. Some of the prominent stocks held for close to a year include ACC, Gujarat Ambuja Cements, Hindustan Lever and Infosys Technologies.

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