Investors can consider exposure in Birla Equity Plan, an open-ended tax-planning fund with a lock-in period of three years.
Under the present market scenario, taking exposure to a diversified equity fund may help reduce risks arising out of volatility, while remaining invested in equities. Birla Equity Plan is an established fund with a consistent performance record over seven years spanning two complete market cycles.
It also has a good track record in managing downside risk, its monthly returns outperforming the markets about two-thirds of the time over the past three years.
It has a portfolio of quality stocks with the flexibility to invest across the market cap range.
Birla Equity Plan returned 36 per cent on a compounded annual basis over the past three years, beating its benchmark - Sensex, which returned about 29 per cent. However, it has trailed its benchmark over the past one year. The fund's long-term track record compares well with other diversified equity funds with a similar profile. Birla Tax Plan is, however, not a category-beater. But the fund's investment strategy is less aggressive than peers in the tax planning space and in that sense, it appears a good choice on a risk-adjusted basis.
As of January 2006, about 60 per cent of the fund's assets were invested in stocks with a market capitalisation of less than Rs 5,000 crore. Stocks in this category normally involve a high degree of risk arising out of low liquidity and unpredictable earnings.
Laden with stocks of reasonably good quality such as Taj GVK Hotels and Gammon India in the mid-cap space, the fund appears to balance its portfolio well.
A compact asset size of Rs 100 crore also facilitates manoeuvrability. Top holdings in sectors such as auto and auto ancillaries and IT also inspire confidence. Investors can consider exposure through the systematic investment plan to take advantage of volatile market phases. The fund's NAV per unit under the dividend option is Rs 54.4. The fund also offers tax deduction under Section 80C of the Income Tax Act.