Zurich India Tax Saver: Invest

Recommendation: Invest

S. Vaidya Nathan

ZURICH India Equity Fund is a good long-term investment option, especially for those seeking to avail of the rebate offered by the Section 88 of the Income-Tax Act, 1961. The portfolio quality is fairly good, though the fund has tended to time the market with regard to some of its exposures.

The fund has a focussed portfolio of a few stocks; this could prove beneficial in the context of a small corpus. For a fund with such an asset base, placing sizeable bets on a few stocks could pay off better. With a sizeable technology sector exposure, the fund may be able to keep up comfortably with the overall market trends. The sizeable cash/cash equivalents could help the fund pick exposures in a market that holds quite a few stocks at attractive valuations from a long-term perspective.

Suitability: The fund is appropriate for those seeking a fairly diversified portfolio with a market level exposure to the technology sector. There are chances that the fund's efforts at trading could pose a risk at some point. But overall, the track record has been fairly good.

Investors with no exposures to the technology sector may be better off choosing options that offer a higher level of exposure. Investors willing to take a three-year lock in may invest even without factoring in the tax effect.

Click here for Chart

Portfolio review: The Zurich India Tax Saver has stayed largely invested in a small group of stocks in a few sectors. Most of these are front-line stocks, though some exposures, such as Tata Engineering (TELCO), could prove costly. The fund has a sizeable exposure in Raymond, which is in the midst of a restructuring exercise involving sale of its cement and steel businesses.

Though the sale has been announced, the fund continues to maintain a high level of exposure in the stock. For this to pay off, a lot would hinge on the manner in which Raymond uses the cash flows and on a possible re-rating of the stock. The fund has traded out and into the Cipla stock. Though two of the top five exposures -- Satyam Computer and Hindustan Lever -- suffered sizeable value erosion in recent months, the fund's portfolio appears well-positioned from a long-term perspective.

Fund facts: Zurich India Tax Saver is an open-end tax savings scheme (launched as a close-end fund in March 1996). The fund had net assets of Rs 42.29 crores as of August 31, 2000. It has a capital base of Rs 22.66 crores and offers Growth and Dividend Options. There is an entry load of 1.75 per cent and no exit load.

The minimum investment amount is Rs 500. The fund paid out Rs 31.60 as dividend with a Rs 21 per unit payout in April. The fund's NAV is Rs 17.18 per unit and it has turned in returns of around 51 per cent per annum, adjusted for dividends. The manager is Mr. Chandresh Nigam.