Taurus Libra Leap: Switch

Recommendation: Switch

Aarati Krishnan

WITH the equity market at low levels, this is not the ideal time to exit an equity-oriented fund.

However, Taurus Libra Leap may be an exception. The portfolio strategy pursued by the fund in 1999/2000 and its present holdings suggest a high risk profile. Investors can, therefore, exit this fund and switch to one of the diversified equity funds with a more consistent track record. More conservative investors may switch to a passive index fund.

For investors who entered the scheme between July 9 and August 22 2001, Libra Leap is offering a safety net facility under which it will repurchase units at the original purchase price. The difference between the repurchase price and the NAV is being borne by the sponsor. For investors who fit this description, it may make all the more sense to exit the fund, since they will not suffer any capital loss on their investment if they do so now.

Suitability: This recommendation is suitable to all investors in the fund.

Performance: Libra Leap emerged as one of the top performing funds in 1999 and 2000. But this was largely on account of the fund's piggybacking on a few momentum-driven stocks of a volatile nature. By end of 1999, the fund had over 40 per cent of its net assets invested in just one stock -- Himachal Futuristic Communications. This also contributed to the fund's exceptional performance in 2000, when it was among the few to turn in positive returns.

Due to its extremely risky strategy of concentrating on a couple of stocks, the fund's NAV has also suffered a dramatic collapse in the bear markets. Since the beginning of 2001 for instance, the fund's NAV has eroded by 47 per cent, while the Sensex lost just around 30 per cent in value. The saving grace for investors in the fund is the 101 per cent dividend it paid out in March 2000. This helped the fund cash in on part of the extraordinary gains it made on its HFCL holdings.

The fund has subsequently reduced its concentration in technology stocks. However, the present portfolio continues to feature several stocks of uncertain quality, where trading volumes are thin -- Nahar Exports and Sovika Infotech being a couple of examples. The fund's top three holdings are Jaiprakash Industries, Crompton Greaves and Ceat, together accounting for nearly 30 per cent of the net assets. This makes for a degree of uncertainty about the future performance.

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Fund facts: Taurus Libra Leap was launched under the aegis of HB Portfolio Management and subsequently taken over by CreditCapital Mutual Fund, which manages the Taurus range of mutual fund schemes. The fund is now open-ended and managed by Mr R. K. Gupta. It charges an entry load of 1.5 per cent and an exit load of 1 per cent. The fund had Rs 15 crore as its corpus in March 2001.