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S. Vaidya Nathan

UNITHOLDERS can stay invested in Franklin India Taxshield, a tax savings scheme from the Franklin Templeton stable. Bunching of fresh investments can be avoided, given the sharp spurt in stock prices. But the fund's track record has been good.

There is thus a strong case for making investments in the fund in a phased manner. The systematic investment plan can be used, as it may enable investors to benefit from any downside in stock prices.

In the bullish phase of the last four months, Taxshield has not done as well as it did in the preceding three years. It outperformed the broad market index, the S&P CNX 500 over the past year by a modest 5.5 percentage points. But in the recent bullish phase, it has actually under-performed the broad index by two percentage points.

This, to some extent, is due to the higher degree of exposure to the IT sector. The fund also appears to have entered key non-IT holdings rather late in the bullish phase. The fund turned in returns of 32.2 per cent in this period, while the market moved up about 35 per cent.

Investors who have completed the lock-in period of three years (to be eligible for tax rebate, on the initial investment, under Section 88 of the Income-Tax Act), can also stay invested as this scheme is one of better equity options.

Suitability: The fund has a more diversified portfolio now than at any time in the past. Earlier, exposure to a couple of sectors accounted for a sizeable portion of net assets.

The fund has also been heavy on IT exposures and only pared them over the past year. It is aggressively managed, with the portfolio being turned over at least once a year.

In this backdrop, despite its diversified nature, the risks are higher than in a typical diversified equity fund, though the fund has generated adequate returns to compensate for the higher risk element.

Investors looking for a tax saving plan that involves equity exposures can consider this fund as well as HDFC Tax Saver (the erstwhile Zurich India Tax Saver). Over the next eight months, it may be better to stay with the Dividend Option due to the tax exemption available.

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