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S. Vaidya Nathan

INVESTMENTS can be considered in Alliance Capital Tax Relief '96, an open-end tax savings fund from Alliance Capital.

The fund has not been among the top performers over the past year; it has, however, notched up returns of about 115 per cent, which compares favourably to the the Nifty, CNX 500 and CNX Mid-Cap as well as a host of diversified equity funds.

A good long-term track record, impressive risk-adjusted returns, a small asset base that offers flexibility in fund management and a portfolio that has the potential to provide gains, going forward, are positive factors from an investment perspective.

Investments, however, can be phased out over a six-to-twelve month period, perhaps using the systematic investment plan. This will enable them to capitalise on any decline in equity prices, which appears a likely prospect. Investment in such a phased manner would also ensure that funds are not completely locked in at current price levels in the midst of a highly volatile market.

Suitability: Alliance Capital Tax Relief has moved away from the investment management style which, until a few years ago, ensured that a large proportion of its assets were invested in sectors such as information technology and telecom as well as select stocks. The portfolio wears a more diversified hue now. The fund management style continues to be aggressive, but less so than in the past. Investors with a penchant for higher risk can contemplate exposures. Investments in the fund are eligible for a rebate under Section 88 of the Income-Tax Act and would have a lock-in period of three years.

Portfolio overview: The fund has a focus on sectors such as banking, IT, auto and pharmaceuticals, which collectively account for about 64 per cent of net assets.

A mix of large-cap and mid-cap stocks, whose composition appears appealing, and exposures in stocks such as Tata Motors, Jammu & Kashmir Bank, Maruti, E-Serve, Hindustan Petroleum and MphasiS BFL, to name a few, that have upside potential, may help the fund withstand volatile markets without a sizeable dent in the NAV.

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