The Hindu Business Line : Magnum Taxgain: Invest

Investors looking for tax-deductible options can consider allocating a portion of their planned investment in Magnum Taxgain. A strong track record, ability to deliver returns superior to average returns of diversified funds and good stock selection are positives for this fund. Returns of 60 per cent over the past one year place it in the 10th position in the universe of equity linked savings schemes.

While funds such as Principal Tax Savings and Kotak Tax Saver have staged a better performance over the above period, the three- and five-year performance chart places Magnum Taxgain at the top of the tax-saving fund category.

Investors may, however, have to temper their return expectations as the huge surge in fund inflow in this scheme may pose challenges in deploying money in equities. Over the past six months, the fund’s asset size surged by 86 per cent, resulting in cash holding of close to 20 per cent.

Suitability: Magnum Taxgain offers deduction under Section 80C (which has a limit of Rs 1 lakh) of the Income Tax Act in the year of investment. It is suitable for investors with a reasonable risk appetite, as the fund is known for ta king sharp hits during volatile market phases. Further, investors looking to save for tax-saving purposes should ensure that they also allocate their money across other fixed return options such as provident fund and deposits to ensure capital protection as equities carry an inherent risk of losing capital.

Performance: Magnum Taxgain’s three-year annual return of 74 per cent has comfortably outpaced its benchmark — BSE 100’s return of 43 per cent. This return is also superior to two other frontline funds from the SBI ho use —Magnum Global and Magnum Contra. That the fund has been consistent in outperforming its benchmark is also evident from its track record of rolling return. Over the past three years, it has either outperformed its benchmark or contained losses on 22 of the 36 months — or a good 60 per cent of the times on a monthly rolling return basis.

Magnum Taxgain, like a good number of other tax-saving funds, had a mid-cap tilted portfolio. However, over the last couple of years, with an increasingly heavy corpus, the fund appears to have deliberately shifted concentration to stocks in the above-Rs 5,000 crore market cap category. This strategy worked well with the fund during the correction in May-June 2006, as it declined lesser than peers such as HDFC TaxSaver and ICICI Pru Tax Plan.

However, that the fund is not in the top five slots over the past one year could be attributed to its declined interest in the mid-cap space (less than Rs 5,000 crore market cap). Only about 22 per cent of the total assets are invested in the above category at present. This is against a good 40-60 per cent exposure by funds such as Kotak Tax Saver or Fidelity Tax Advantage, whose one-year returns are higher than Magnum Taxgain. The fund’s large corpus, at Rs 2,171 crore, has prompted it to hold a large basket of about 85 stocks, with the top ten holdings accounting for less than 30 per cent of the total asset size. The NAV per unit is Rs 49.10.

More Stories on : Mutual Funds | Recommendation

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