The Hindu Business Line : Principal Tax Saving Fund: Invest

Investments can be considered in the Principal Tax Saving Fund based on its good five and three-year record. Like many of its peers, the fund invests close to half of its assets in mid-cap stocks with a market capitalisation of less than Rs 5,000 crore. Taking advantage of the three-year lock-in period, several ELSS (Equity Linked Saving Schemes) invest in mid-cap stocks to improve returns. Hence, the fund has outpaced its benchmark, the CNX Nifty, substantially.

Suitability: The fund is suitable for investors planning to diversify among tax saving funds. Its monthly returns tend to deviate significantly from its benchmark at times and this implies that it is more suitable for aggressive inve stors.

Performance: With its one-year return of 65 per cent, the fund has trailed the Principal Personal Tax Saver, which has delivered 74 cent return.

Over the past year, it outpaced the Magnum Tax Gain, a star performer even among diversified funds over a longer time-frame. With mid-cap stocks rallying for the past few months, the fund has registered strong performance over a three-year time-frame. On a monthly return basis, in the past 24 months, it has trailed Nifty nine times, reflecting fairly consistent performance.

Profile: Capital goods continue to occupy the top slot for the past six months in the portfolio while construction and banks were the other two preferred sectors.

In the June portfolio, the fund held 37 stocks and the top 10 accounted for 40 per cent of the assets. Except for a brief period, the fund has been underweight on the IT sector.

Fund facts: The fund was launched in March 1993. Managed by Mr R. Srinivasan, it offers free accident death insurance for the first three years based on investment.

Investment in ELSS schemes is eligible for tax benefits up to a limit of Rs 1 lakh under section 80C. The NAV per unit is 93.67

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