The Hindu Business Line : PruICICI Tax Plan: Invest

INVESTORS who want to add to their portfolio of tax-saving funds can consider an investment in PruICICI Tax Plan. As the deduction under the Income Tax Act for tax-saving funds is available up to Rs 1 lakh for the current fiscal, exposures to the fund would benefit investors in terms of tax planning and also yield reasonable returns, given the track record.

PruICICI Tax Plan has an impressive track record of close to 80 per cent annualised returns in the past three years. This notable performance is backed by an aggressive strategy of a wide- ranging exposure to mid and small-cap stocks across sectors. Unlike its peer HDFC TaxSaver, that has slightly modified its portfolio to have more stocks from the large cap basket, PruICICI continues to hold more mid- and small-cap stocks. About 55 per cent of the investment was in stocks with a market cap of less than Rs 1,000 crore in December 2005. This makes the fund a riskier option in terms of volatility compared to few other diversified funds with a large-cap bias. Investors may, therefore, avoid parking too large a proportion of their portfolio in this fund.

PruICICI Tax Plan has a well-diversified portfolio of about 60 stocks, with not more than 5 per cent allocated to a stock at any point in time. As of December 2005, auto ancillaries, pharmaceuticals and consumer non-durables accounted for about 34 per cent of the net assets.

The fund's top picks such as National Aluminium, Sundaram Clayton and Exide Industries have delivered good returns. Unconventional small-cap picks such as Fulford India, Tayo Rolls and Ultramarine Pigments add to the risk profile, as the downside may be higher in the event of a market decline.

The fund's selection skills have, however, stood it in good stead in the past. The portfolio's current average price-earnings multiple of 16 also indicates that the majority of the stocks picked are within the broad market valuations and offer scope for growth.

Performance: PruICICI Tax Plan has comfortably outperformed its benchmark S&P CNX Nifty in the past five years.

The fund's one-year return, at about 70 per cent, outperforms most other tax saving funds, but trails SBI Magnum Tax Gain and HDFC TaxSaver. The last six months return is, however, in line with the peers.

Investment in the fund can be considered through the systematic investment plan (SIP), as this is likely to help capitalise on market weakness.

Investment made through this route over the last one year would have returned 75 per cent compared to the benchmark return of 36 per cent.

: PruICICI Tax Plan was launched in August 1999. Minimum investment under the scheme and under SIP is Rs 500. There is a lock-in period of three years. The entry load is 2.25 per cent. There is no exit load. The fund size stood at Rs 209 crore. Mr Sankaran Naren manages this fund.

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