ICICI Pru Tax Plan - INVEST

Those who wish to invest in mutual funds for saving tax under Sec 80C can buy units of ICICI Pru Tax Plan (ICICI Tax).

The fund has a solid track record in delivering steady returns. Over one, three and five-year timeframes, it has consistently beaten its benchmark, the S&P CNX 500, by between 4.5 and 6.5 percentage points.

ICICI Tax has delivered a compounded annual return of 5.6 per cent over a five-year period, making it the best performing fund in the category of tax planning funds.

Over the last ten years, its compounded annual returns stand at 28.75 per cent, just a shade below the 29.5 per cent clocked by the top performer for this time period — HDFC Tax Saver.

Performance and suitability

While the fund lagged its benchmark in the 2007 rally, it has been an outperformer in more recent upswings. In the rally that began in March 2009 and lasted until November 2010, ICICI Tax bettered the returns of its benchmark by about 57 percentage points. So far in 2012, while the CNX 500 has gained 30.5 per cent, ICICI Tax sports about 35 per cent returns. In both these cases, the fund has done better than its peer benchmarked to the same index - HDFC Tax Saver.

However, during market falls, HDFC Tax Saver contains downsides better. For example, during the whole of 2008 and until March 2009, ICICI Tax mirrored the CNX 500’s fall of 64 per cent, while the HDFC fund contained losses at 59 per cent. Ditto in the 2011 fall. So ICICI Tax is suitable for investors who are willing to take a moderate level of risk to earn better returns.

Considering that every investment in tax saving funds has a lock-in of three years, investors can perhaps go in for lumpsum investments rather than SIPs.

Portfolio

The fund always remains invested above 90 per cent levels in equity, irrespective of market conditions.

Banks, software and pharma have been the preferred sectors for the fund in the last one year but it has reduced concentration on IT stocks since July 2012.

Exposure to petroleum products too has been cut down in recent months. The telecom sector has seen increased interest lately, with the Bharti Airtel stock constituting 10 per cent of the total holdings of the fund currently.

Of a total of about 60 stocks in the portfolio, a little more than half consists of large-caps (those with market capitalisation of Rs 7,500 crore and above).

Federal Bank, Container Corporation and Apollo Tyres are recent exits while Axis Bank, Nestle, HDFC and Indian Hotels are fresh additions. The NAV per unit of the growth option is Rs 155.82.

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