Fund Snapshot:
Structure Open Ended Equity Growth fund
Fund Manager Ashwani Kumar
Fund Objective The primary objective of the scheme is to generate long-term capital appreciation from a
portfolio that is invested predominantly in equity and equity related instruments.
Indicative Investment Horizon 5 yrs. & more
Inception Date 23rd Aug, 2005
Fund Size Rs. 1703.44 Crores
Face Value (Rs./Unit) Rs. 10
NAV (as on 31st May, 2007) Growth option : Rs. 14.52
Minimum Investment Rs. 500
Expense Ratio 1.93%
Benchmark BSE 100
Fund Style Portfolio Characteristics
Understanding the Portfolio:
Reliance Tax Saver Fund Plan continues to be a high-return high-risk game for investors. It may not go down well with investors who are looking for stability over flashy returns. Its concentration in small and mid cap stocks is a testimony to this fact. Mid caps and small caps occupy humungous space in its portfolio, at 36 and 43 per cent, respectively. Large cap companies have a small presence in its portfolio (6.55 per cent in May, 2007).
The fund is no doubt aggressive but it has been able to justify its strategy through good returns. The fund is not only aggressive in selecting stocks but also churns its portfolio very vociferously.
Basic Engineering sector remains the top holding of the fund followed by Automobile, Technology and Construction. Areva T and D India Ltd is currently its top holding with an over 7.39 per cent allocation (as per May 2007 portfolio). Alstom Projects India Ltd (5.36 per cent), Punjab Tractors Ltd (4.86 per cent) and Tata Consultancy Services Ltd (4.26 per cent) are the other major holdings.
Our View:
Risk-averse investors may complain about the volatility factor in an equity-linked instrument but the same is taken care of by the mandatory three-year lock-in period. Equities tend to be volatile over the short-term, but the performance tends to get smoothened-out over a longer, three-year time frame. Even the fund manager is not under pressure to take risky, aggressive investment calls to deliver short-term growth, as investors are in the Fund for the long haul. This translates into lower volatility in an ELSS, as compared to that in a diversified equity fund.
Moreover, equities outperform other investment avenues like bonds, real estate and gold, over the long term (at least 10 years). Therefore, ELSS offers investors a window to benefit from the 'power' of equities and also claim tax benefits to boot! No doubt NSC and PPF offer investors an assured return, but equities have the potential to offer a higher return vis-à-vis fixed income avenues, as has been established in several studies.
Another factor that is often ignored by investors and rarely factored-in while calculating returns is inflation. Inflation dampens returns and pulls down the 'real return on investment'. To put it simply, if your investment offers you a return of 8% p.a. and inflation is at 4%, your real return is (8% minus 4%) 4%, at the end of the first year. Equities are the only investment avenue that can counter inflation effectively and enable investors to post a healthy return, post-inflation.
Structure Open Ended Equity Growth fund
Fund Manager Ashwani Kumar
Fund Objective The primary objective of the scheme is to generate long-term capital appreciation from a
portfolio that is invested predominantly in equity and equity related instruments.
Indicative Investment Horizon 5 yrs. & more
Inception Date 23rd Aug, 2005
Fund Size Rs. 1703.44 Crores
Face Value (Rs./Unit) Rs. 10
NAV (as on 31st May, 2007) Growth option : Rs. 14.52
Minimum Investment Rs. 500
Expense Ratio 1.93%
Benchmark BSE 100
Fund Style Portfolio Characteristics
Understanding the Portfolio:
Reliance Tax Saver Fund Plan continues to be a high-return high-risk game for investors. It may not go down well with investors who are looking for stability over flashy returns. Its concentration in small and mid cap stocks is a testimony to this fact. Mid caps and small caps occupy humungous space in its portfolio, at 36 and 43 per cent, respectively. Large cap companies have a small presence in its portfolio (6.55 per cent in May, 2007).
The fund is no doubt aggressive but it has been able to justify its strategy through good returns. The fund is not only aggressive in selecting stocks but also churns its portfolio very vociferously.
Basic Engineering sector remains the top holding of the fund followed by Automobile, Technology and Construction. Areva T and D India Ltd is currently its top holding with an over 7.39 per cent allocation (as per May 2007 portfolio). Alstom Projects India Ltd (5.36 per cent), Punjab Tractors Ltd (4.86 per cent) and Tata Consultancy Services Ltd (4.26 per cent) are the other major holdings.
Our View:
Risk-averse investors may complain about the volatility factor in an equity-linked instrument but the same is taken care of by the mandatory three-year lock-in period. Equities tend to be volatile over the short-term, but the performance tends to get smoothened-out over a longer, three-year time frame. Even the fund manager is not under pressure to take risky, aggressive investment calls to deliver short-term growth, as investors are in the Fund for the long haul. This translates into lower volatility in an ELSS, as compared to that in a diversified equity fund.
Moreover, equities outperform other investment avenues like bonds, real estate and gold, over the long term (at least 10 years). Therefore, ELSS offers investors a window to benefit from the 'power' of equities and also claim tax benefits to boot! No doubt NSC and PPF offer investors an assured return, but equities have the potential to offer a higher return vis-à-vis fixed income avenues, as has been established in several studies.
Another factor that is often ignored by investors and rarely factored-in while calculating returns is inflation. Inflation dampens returns and pulls down the 'real return on investment'. To put it simply, if your investment offers you a return of 8% p.a. and inflation is at 4%, your real return is (8% minus 4%) 4%, at the end of the first year. Equities are the only investment avenue that can counter inflation effectively and enable investors to post a healthy return, post-inflation.