The Hindu Business Line : Magnum Tax Gain: Hold

Unit holders can retain their investments in Magnum Tax Gain even if their three-year lock-in period is over. The fund trailed the benchmark BSE-100 over the past year. But a strong track record, and ability to deliver superior returns when compared to its category average over the past three- and five-year periods warrants a hold despite the blip in performance.

Consistent performance over the past five years places the fund among the top five in the universe of ELSS (equity-linked saving schemes). Challenged by huge inflows, the fund’s return was muted over the last year.

During this period the fund’s asset size surged by 75 per cent and accounted for a fifth of the total assets under management in the domestic ELSS universe.

Suitability: Heavy exposure to mid-cap stocks often resulted in sharp swings in performance of ELSS schemes during bull as well as bear markets.

In recent times, some of the ELSS schemes appeared to prefer higher holding in large-cap stocks to avoid high volatility. This strategy has, in turn, moderated the returns for some of them; Magnum Tax is one such fund.

While the risks related to equities remain with the fund, the large-cap tilt provides some comfort; the recent returns, although muted in relation to its past performance, are an improvement for those who have held the fund over the last three years.

Investors considering fresh exposure can, however, wait and watch for the fund’s ability to deliver on the back of a mounting asset base.

Performance: Magnum Tax Gain has generated a return of 18 per cent and trailed the benchmark BSE-100 by 8 percentage points. During the same time-frame, such peers as Sundaram BNP Paribas Tax Saver, Principal Personal Tax Saver and Birla Sun Life Tax Relief 96 outpaced the fund by 8-12 percentage points.

On the positive side, Magnum Taxgain contained losses better than its benchmark in the quarter ended March 2008. Of the total assets, 65 per cent was invested in stocks with market capitalisation above Rs 7,500 crore.

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