The Hindu Business Line : Magnum Tax Gain: Invest

Investment can be considered in Magnum Tax Gain based on its long-term track record. The fund outpaced its benchmark BSE-100 marginally over a one-year period, while it has trailed close to half its ELSS peers. However, consistent performance over a five-year period places it at the top of the ELSS universe as well as diversified funds.

The fund generated a compounded annualised return of 26 per cent over a five-year time frame and outperformed its peers with wide margin (barring a few) of about 10 percentage points.

Suitability: Equity-linked saving schemes tend to have volatile phases due to higher exposure to mid- and small-cap stocks. Over the last ten years Magnum Tax Gain considerably outpaced the BSE-100 whenever the market rallied but, equally, trailed during correction phases.

However, in the last couple of years, due to steep increase in assets under management the fund predominantly invests in large-cap stocks (market capitalisation over Rs 7,500 crore). While this strategy can reduce the risk profile, this may cap its potential to earn high returns. Investors can consider investment into this fund as part of diversification, provided they already hold Sundaram BNP Paribas Tax Saver.

Profile: The January portfolio held as many as 73 stocks. Over a one-year period the fund restricted its stock-specific exposure to less than five per cent of the assets. Magnum Tax Gain invests across the market capitalisation. At present, 52 per cent of its assets are in large-cap stocks, 18 per cent in mid- and small-cap stocks and rest in debt and cash equivalent. But the well spread portfolio failed to contain the losses over the past year due its sector selection.

The fund had lower exposure to sectors such as consumer goods and pharmaceuticals; these sectors lost 25 per cent over a one-year period compared to the over 42 per cent declines of the bellwether indices BSE Sensex and Nifty.

Among its stock-specific moves, the fund’s timely exit in Satyam Computer in December 2008 was a swift shift.

Fund facts: The fund was launched in March 1993. The NAV per unit is Rs 30.69. Investment in the fund is eligible for tax benefits under Section 80C.

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